By Ron Delnevo
Bank Machine Ltd.
This story was originally published on ATMmarketplace.com Sept. 25, 2007; reprinted with permission. (c) 2007 NetWorld Alliance LLC. All rights reserved.
The latest ploy to rid the British public of the cash they prefer _ over 60% of all transactions in the U.K. in 2006 were made using cash _ has been seen this month with the introduction of contactless cards.
The system is quite clearly another step by the financial institutions to force through the cashless society that will bring them even bigger profits, but with the British public facing the prospect of a new "plastic society," with spiraling personal debt and rising prices.
The new cards enable consumers to pay for transactions without the use of a personal identification number. The absence of a PIN brings very real and worrying security implications.
The contactless technology, which is integrated into the consumers debit or credit card, is likely, on average, to ask people to enter their PIN only every 10 to 15 transactions, with no need for security checks. This leaves a considerable number of "free" transactions for anyone who happens to come across the card. Using cash is the only way that consumers can be assured of no fraudulent activity.
It is surely laughable that the banking industry has undergone huge efforts _ and expense _ to reduce fraud by introducing "chip and PIN," but is now insisting that no PIN is required for contactless transactions.
Those same banks also complain about the risks associated with the £50 cheque ($101.85 U.S. dollars) guarantee scheme, where at least an attempt is made to verify a signature; yet now they are prepared to see £100-plus ($203.70 USD) spent using contactless cards without a PIN being required.
The potential advent of a cashless society is also a concern from the macroeconomic point of view. For example, what will happen to the British pound, should the banks get their way and remove cash from the pockets of the public? Is this simply a device to allow the imposition of the euro through the back door?
The "plastic path" is not one the British public wants to tread. An independent survey conducted earlier this year revealed that 75% of British consumers want to go on using cash.
As a reaction to the introduction of the contactless cards, retailers have gone on record to reveal that cash is cheaper to handle than plastic for transactions under £10 ($20.37 USD). So we have a system favored by banks but one that doesn't benefit the British public or British retailers.
Cash is still the cheapest and most convenient form of payment in the U.K. With U.K. consumer debt becoming an ever-increasing concern, it is nonsense that British consumers should be pushed against their clearly stated will to use plastic when cash is the only true way to budget effectively. Cash gives the consumer control. Plastic gives him higher bills to pay.
According to Bank Machine Ltd.'s independent survey conducted by Yougov, 76% of the British public is unaware of the introduction of contactless payment in the marketplace. (MasterCard Worldwide in early September announced plans to introduce its PayPass tap-and-pay technology in the U.K. before the end of the year.)
According to the Yougov survey, only 15% of British consumers say they are likely to use the tap-and-go card for transactions less than £10, so why would retailers invest in the system, if 85% are happy to continue using cash?
And many of the consumers surveyed noted that security was a primary concern. In fact, 72% said they believed contactless cards would be easier for their children to use, since no PIN is required for low-pound transactions.
So, believing that it will make it easier for children to purchase any items using a card without permission, are parents then responsible or will children be prosecuted?
Also, consumers aren't likely to have an alternative if contactless cards become the norm. These new contactless cards will not be a separate card that the British public can choose not to have: Banks are simply planning to issue a revised version of existing debit cards, which 91% of card-carrying U.K. consumers possess.
About 70 million cards will all be enabled for contactless use, with individuals forced to accept the security risks, despite the fact that 40% say they would rather have the opportunity to deactivate the card.
The government should insist that contactless cards, if issued at all, be separate from all other cards, so that the British public can opt not to carry them if they so choose.
It is clear we are once again being forced, without a choice, down the "Plastic Road" that card issuers find so profitable _ something that has obvious implications, particularly with the rate of consumer debt in the U.K. spiraling out of control.
ATMmarketplace editor's note: Adil Moussa, an industry analyst with Aite Group, expects MasterCard's PayPass technology to be well accepted and adopted by the British public.
In a statement released by Aite on Sept. 4, Moussa said: "MasterCard is rolling out PayPass in the U.K. at the right time and in the right place, and it should be very successful. I predict a huge adoption rate as the strategies of MasterCard and RBS (Royal Bank of Scotland) seem very well calibrated.
First, they have selected and equipped retailers with significant traffic with readers; second, they limited the focus of the rollout to one geographical location (London) that is known as a modern, cutting-edge city; and finally, they targeted a segment of cardholders that will adopt this novelty quickly. An increase in new MasterCard cardholders in the U.K. as a direct result of the strategy seems inevitable."
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