Business Essentials: Just deserts for fraudsters but will a restaurant be skewered?

The Brazz chain is unsure how best to prepare for the new Chip and PIN payment system, says Kate Hilpern

Like all UK companies that accept payment by credit or debit card, the Brazz restaurant group has to update its technology by January 2005 to allow customers to punch in a PIN number as well as sign on the dotted line. "I know just two things about the Chip and PIN programme: its goal and the result of not complying," says Ian Fitzgerald, manager of the group.

Like all UK companies that accept payment by credit or debit card, the Brazz restaurant group has to update its technology by January 2005 to allow customers to punch in a PIN number as well as sign on the dotted line. "I know just two things about the Chip and PIN programme: its goal and the result of not complying," says Ian Fitzgerald, manager of the group.

All UK businesses should by now have been told that the goal is to combat card theft and fraud and that, if they fail to upgrade by the deadline, the responsibility will lie with them rather than the banks.

What Mr Fitzgerald doesn't understand, though, is how it will affect his business financially. "For example, what will upgrading cost me?" he asks. Like many small- and medium-sized operations, he rents the machines used for card transactions across his three brasser- ies in Exeter, Taunton and Bristol. "I'm not sure whether to expect a huge hike in rental charges - which would mean it's better for us to buy the machines - or if rising prices will make buying an expensive option too. After all, the cost of updating must be moving somewhere."

If the new system does result in extra expense, he would like to know if he should pass this on to his consumers. Alterna-tively, could he actually save money in the long run? "We've been told about the benefits for banks and for customers, but nothing about whether there are any advantages for businesses."

That so many of Brazz's customers pay by card is cause for further concern. "As a restaurant group, we have a lot of card transactions going on at peak times. Because the static machines we use are all connected to one phone line, waiters often have to wait their turn when a customer gives them their card. That works fine because the customer is usually finishing their coffee and unaware. But when we have to take a hand-held machine to the customer for them to punch in their PIN number, it won't be so easy. I am wondering if we'll have to move on to some other kind of communication like broadband so that several waiters can dial up at any one time."

Brazz also has a lot on its plate. "Not only are we currently implementing a new menu across all three sites, where most of the spend is on cards, but in November 2004 we open the flagship restaurant in the Wales Millennium Centre. So it's crucial we fully understand the implications for our business."

www.brazz.co.uk

WHAT THE EXPERTS SAY

Nick McGarvey, managing director, CreditCall

"Chip and PIN is motivated by one issue: reducing retail fraud. For banks, petrol stations and rail ticketing, this works well, as the customer and the PIN pad are in the same place. In restaurants, however, the two are some distance apart, so Brazz will need to change the way it takes card payments, as well as the technology it uses.

"Diners will expect to have the PIN pad brought to them in order to pay, and Brazz will require wireless terminals that use Bluetooth, WiFi or DECT.

"In time, these devices could also evolve for use in order taking - allowing orders to be relayed to the kitchen automatically and floor staff to be paged when the food is ready. This will mean employees spend less time running around, and more time looking after diners."

David Robertson, chief executive, Bibby Financial Services

"Because Brazz actually rents credit card terminals from its bank, the direct financial implications are likely to be minimal: the bank should provide the new technology at no additional cost.

"But firms that own their point-of-sale equipment will need to upgrade both their hardware and software so it can read the information held on the chip, and let cardholders enter their PIN via a keyboard.

"All firms, however, need to invest in staff training to ensure that, from day one of adoption, customer service is seamless and the business is able to operate as normal. In this way, revenue projections will remain on target. This will require careful planning and budgeting.

"The earlier firms begin planning for the potential costs associated with Chip and PIN, the better. Any unforeseen expenditure could have a negative impact on the company's cashflow."

Sandra Quinn, director of corporate communications, Association for Payment Clearing Services (Apacs)

"It is vital that all restaurants, bars, retailers and other businesses taking card payments consider the liability shift date: 1 January 2005. After this time, fraud will shift to the lowest link in the chain - essentially to whoever does not use the Chip and PIN technology.

"The good news is that Chip and PIN should bring lower transaction costs for those businesses that rent their equipment from their bank. But time is critical for implementing Chip and PIN, and Brazz therefore needs to engage now if it wants to have completed rollout by the end of 2004.

"Businesses that rent their terminals should speak to their banks, which will be happy to provide all the information they need."