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Elimination of surcharges is a major advantage

NATIONAL REPORT -- The use of debit cards and electronic signatures -- already a standard in department stores, supermarkets and other high-volume retailers -- is finally making its way to the check-out lanes at home improvement stores.

HomeBase installed both technologies in all its units this past summer. Orchard Supply Hardware just completed a rollout of debit card readers and is now adding electronic signature capabilities. Home Depot is getting ready to roll out both technologies next year. The buying groups Do it Best, Ace Hardware and TruServ are also looking into the latest in point-of-sale systems for their dealer-members.

Debit cards work just like credit cards, except that payments are automatically deducted from a customer's savings or checking account. With electronic signatures, customers use a stylus to sign their names on a screen. The signature is then "captured" and stored electronically. Both technologies offer retailers considerable savings in time and money.

Unlike credit cards, debit cards don't carry a surcharge for the retailer, which typically ranges from 1 percent to 3 percent per transaction. Signature capture eliminates the need to handle and store hard copies of every credit card transaction. These two advantages convinced HomeBase, the Irvine, Calif.-based home-improvement chain, to start installing both systems last August. All 88 stores (including its five House2Home test stores) now have signature capture and debit card capabilities at each register.

Using an interactive touch screen, HomeBase customers can choose "credit" or "debit" and then swipe their cards through a magnetic-strip reader. The machine toggles between a signature capture for credit cards and a personal identification number prompt for checking accounts. Since the PIN allows HomeBase to check bank account balances, customers in need of cash can request up to $60 back.

David Swanberg, vp-finance for HomeBase, has calculated that the upgrade will pay for itself within a year. "It has an immediate payback," Swanberg said, citing the average credit-card transaction fee for HomeBase at somewhere between 80 cents and 90 cents.

The electronic-signature capability will free HomeBase from the burden of storing paper records on approximately 10 million credit-card transactions per year. Hard copies of each signature are kept in case of "charge-backs," which happen when a customer challenges a purchase found on his or her credit-card statement. On average, HomeBase fields 35 charge-backs a day, counting all stores. The chain already keeps an electronic journal of credit-card transactions, and now the customer signatures can be added and retrieved, if necessary, at a later date.

'Check card' dilemma

HomeBase is using the same interactive touch screens as the San Jose, Calif.-based Orchard Supply, which began replacing its POS terminals at its 85 stores in May and finished last month. Phase two of the project -- adding signature capture to the terminals -- will take place over the next six months, according to Orchard vp and chief information officer Garry Beaty.

"The debit card [rollout] was worth a whole lot of money to us," said Beaty, declining to give specific figures. Orchard also extends a cashback option (up to $40) to shoppers, a convenience that customers have come to expect from supermarkets and other retail establishments. "Our employees really appreciate it, too," Beaty added.

Introducing debit-card readers may provide a solution to a longstanding feud between retailers and the credit card industry over the processing of "check cards" purchases. Check cards, which function as both debit and credit cards, are automatically processed as credit transactions, resulting in a surcharge to the retailer. But when customers enter their PINs at the point of sale, the purchase goes through as a bank debit, eliminating the processing fee.

The new POS systems are not without their drawbacks, however. Most require precise timing and careful selection, especially with overly sensitive touch screens. Customers can get confused and frustrated; cashiers require an additional level of training.

# posted by Medical Information : 1:50 AM