By John Rozek —
Contactless cards have been hailed as the “next big thing” in the payments industry. With more than 17 million contactless cards already in circulation and 75,000 points of sale across the UK, it’s easy to see why many in the industry believe we are reaching a ‘tipping point’.
According to Visa, 2012 is the year that contactless will become a mainstream payment method in the UK. This will be fuelled, at least in part, by the 2012 London Olympics—the “cashless games.” More and more UK retailers, including big brands like Tesco and Boots, are now rolling-out contactless across their stores and many now believe that contactless—almost seven years after it was first introduced by the card schemes—is finally on the cusp of really taking off.
Some industry experts, however, believe that celebrating the success of contactless adoption is premature. They also believe that, despite the hype, there is still a lot of work to be done before cardholders really embrace this new method of payment.
Tipping point for contactless?
For the majority of cardholders, Chip and PIN is an ideal source of payment as it is secure and can be used in all locations; contactless gives them virtually no additional benefits. In addition, many do not know which of their cards actually support contactless, or which retailers accept it as a means of payment.
As many checkout operators are not trained in contactless they are less likely to promote it, and if terminals are damaged or not working properly it further hinders mass adoption. And although the speed at point of sale (POS) of contactless is undoubtedly a positive, the benefit is largely aimed towards the retailer rather than the cardholder.
Contactless also has a £15 maximum spend limit which experts argue is too low; many shops have a £5 card minimum spend limit, which means that cardholders need to ensure that their purchases cost between £5 and £15. Raising the contactless spend limit would certainly help increase its popularity. Larger retailers do not have a minimum limit, so in many instances cardholders will be able to use contactless most times they visit certain stores.
While there has been much talk to suggest that the London Olympics 2012 will drive contactless adoption, experts believe that the extent to which this will happen has been exaggerated. For those lucky enough to have secured Olympic tickets, it is unlikely that they will have access to more than one session, during which they will be far more focused on the event in hand than using contactless. Due to the scarcity of tickets the majority of people will have to settle for watching the Olympics on TV, further reducing the impact the events will have on contactless adoption.
Near Field Communication (NFC) will open up contactless payments to an adoption group keen to use technology on their mobiles, but again, many believe that contactless on its own does not have the same appeal. Smart phone users expect functionally rich apps to enhance their shopping experience and are used to one-touch payments over the internet for iTunes, Amazon, Google and so on; it would be very difficult for contactless to compete with this experience.
However, NFC is widely expected to enable “higher value payments,” where the customer is able to enter their PIN via their mobile. Industry announcements are widely expected next year, really opening up the way to contactless payments via the mobile phone.
Mobile wallets will offer dramatically more exciting options than simple contactless. Not only do they allow users on the move to access financial accounts, but they also play an integral part in the development of digital commerce and banking. Initiatives such as Barclay’s launch of Pingit will drive person to person mobile payments and experts anticipate that the winning mobile wallet offerings will go viral!
For contactless to be truly successful it needs to be part of a wider solution and not used in isolation. It needs to be convenient and quickly become mainstream. More importantly however, it needs to be promoted by well known and trusted industries such as public transport, where people can be assured and encouraged to use it as a convenient and safe alternative to cash.
About the Author
John Rozek has over 16 years of experience working at the forefront of the payments industry. Working with Royal Bank of Scotland and NatWest, John led an industry leading cross-border implementation and ATM service delivery programme. He also led the team that introduced Chip and PIN to over 120,000 points of sale across UK. John was one of the founding members of Polar Moment and has played a key role in developing the organisation to become a leading provider of payments consultancy. He is a recognised name across the sector, delivering payment industry consultancy and business development services.