By David Talach
Experienced payments professionals tend to steer away from declaring this is the year of (add technology of choice). As most of us know, retailers are typically very conservative when it comes to adopting new technology, while consumers often shrug at the latest wonders.
Nonetheless, it does seem like contactless payment is really taking hold.
MasterCard Worldwide recently reported that it distributed more than 20 million devices for its PayPass contactless cards that contain a magnetic stripe, an embedded computer chip and an antenna. Approximately 80,000 merchants in 20 countries now accept this form of payment.
That's all well and fine, but more important were MasterCard's survey results of consumer attitudes regarding contactless payments:
Those results are pretty amazing, considering only a relatively small percentage of consumers actually have contactless cards and there has been relatively little in the way of public education about the benefits. With card issuance, merchant acceptance and deployment growing and consumer awareness increasing, the question is no longer if contactless will take off; it's a question of when.
Adding a contactless payment option to the POS offers significant advantages for merchants who believe speed and convenience are instrumental to maintaining customer loyalty and maximizing revenue during peak hours.
For example, speedy payment acceptance at a quick service sandwich shop during the lunchtime rush can mean accommodating additional customers who might otherwise leave when they see a queue.
Aberdeen Group Inc., a market research company, recently surveyed 225 companies using contactless payment in a variety of retail environments. Aberdeen concluded that "best in class" implementers were experiencing tangible benefits:
The benefits of contactless payment for consumers and retailers were proven in numerous implementations.
According to the Smart Card Alliance, a review of various studies indicated contactless payment reduced customer time at the POS by 30% to 40%. Contactless transactions were 63% faster than cash transactions and 53% faster than traditional credit card transactions.
"These increases in speed and convenience result in greater sales volumes and increased customer spending," the SCA stated. "Customers spend about 20% to 30% more when using contactless payment devices than when they use cash."
Dozens of large chains, including CVS Caremark and McDonald's Corp., have taken notice and implemented nationwide rollouts. Today, just about every major retailer ordering payment solutions is requiring, at minimum, the ability to allow conversion to or addition of contactless capabilities in the future.
One of the most alluring attributes of today's contactless payment standards is the compatibility with near field communications (NFC). This technology is at the heart of almost all mobile phone-based payment pilots popping up everywhere these days. "Contactless payments and loyalty programs driven by mobile phones of customers present an opportunity for expanding the consumer payments horizon to a whole new level of convenience," Aberdeen stated.
NFC-equipped cell phones offer the potential of easy-to-store, easy-to-use electronic wallets that can hold and organize all payment accounts for consumers. NFC-equipped devices - and they don't have to be phones; they can be any devices equipped with contactless capability - could really change the way consumers execute payments at the POS. Today's typical consumers have more payment and loyalty cards than room in their wallet. With electronic wallets, card accounts can be activated over the air so consumers don't even have to touch a piece of plastic if they don't want to.
The biggest hang-up over NFC is how the mobile network operators and payment networks are going to split fees for conducting the transaction. At some point, they will all come to realize the key issue is sharing in a growing market, rather than holding out for total control.
In the meantime, cards and card readers continue to roll out the door. As ISOs and merchant level salespeople connect each new merchant with contactless capabilities, they're laying the infrastructure for mobile payments. So not only are the feet on the street creating new, immediate sales, but they're also setting the stage to be players as more opportunities arise.
Contactless certainly seems to have gained a base level of support. Once consumers become accustomed to a new payment mechanism, they begin to expect it everywhere.
This will increase retailers' willingness to bite the bullet and equip their checkout lanes with the technology. The alternative is to watch their most valuable customers take their business to someone willing to accommodate them.
David Talach is Director, Global Product Management, with VeriFone. He can be reached at firstname.lastname@example.org.
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