Electronic POS debit system draws near at K mart - Antonini's K mart

Discount Store News, Sept 26, 1988 by Deane Evans

Electronic POS Debit System Draws Near at K mart

WASHINGTON -- K mart has put into place technology that not only allows the chain to quickly obtain credit card approval for purchases with daily settlement of charges, but can also be easily enhanced to handle futuristic debit card transactions.

The new electronic check and credit card authorization system, installed in more than 500 of its stores last year, places K mart only a step away from a high-tech, electronic point-of-sale debit/credit system which could cut down on bad check losses, improve cash flow and speed up checkout operations.

According to industry experts, the new system could be "enhanced" quickly and inexpensively to enable K mart to electronically "debit" its customers' checking accounts.

The chain's present system allows K mart to obtain credit authorization in six to seven seconds and includes a "draft capture" function, i.e., daily settlement of credit card charges via an electronic "draft" from a service provider such as Visa.

Specifically, the checkout clerk uses a terminal with a magnetic stripe reader to authenticate credit cards and check-cashing cards. In addition, each transaction is automatically stored in the terminal's memory. At the end of the day, the stored charges are transmitted to the service provider which will electronically transfer the funds to K mart's account.

The entire system--about 20,000 terminals--cost K mart more than $2 million and paid for itself in about six months, according to officials of the ICOT Corp., which rolled out the current draft capture system in 500 K mart stores last year.

Moreover, in an interview with DSN, ICOT Business and Development vice president Kiran Gandhi said the chain could save even more time and money by adding a debit function to the system. For example, with an on-line debit system, K mart customers could use an automatic teller machine card or other debit card to access a checking or savings account. The computer would verify available funds and immediately debit the consumer's account and credit the retailer's account for the purchase.

An off-line debit system using electronic "checks" and automated clearing house payments is also available, Gandhi said, but requires one to two business days to complete transfer of funds.

Upgrading a Simple Process

He explained that K mart's current system could be upgraded to a full-fledged electronic debit system simply by changing terminals in the checkout lanes. Depending on how far K mart wants to take the technology, the chain could institute the debit system by upgrading terminals, at a cost of about $350 per register. By spending a little more, approximately $550 per lane, K mart could install a more sophisticated customer-operated terminal.

The upgraded system involves "user-friendly" customer-operated computer terminals. Customers can run their ATM cards through the terminal themselves, enter their codes and automatically debit their bank accounts for the total sale, gandhi said. The terminal can also accommodate check-cashing cards to authorize paper checks.

Whether or not the discount chain will go the debit system route, however, it uncertain. At a meeting earlier this year, Joe Thomas, K mart's executive vp and chief administrative officer, noted that by the end of this year, 1,234 K mart stores or about 40 percent of the chain will be utilizing the new point of sale system, with chainwide use expected by the middle of 1990.

"By the first year of the new decade, all stores will have scanning and satellite [technology] and be fully centralized [i.e., all merchandise will be assigned from headquarters]," predicted Thomas.

For now, the focus of K mart's technology efforts is on installing front-end scanning, automating the receiving process and tracking an ongoing inventory of over 150,000 sku's.

Debit cards "are on the rise," ICOT officials said, citing a 1987 study by Carmondy and Company which forecast than 178,000 debit terminals will be in use by 1990.