Contactless: too isolated to be the next big thing? - Business Works
BW brief

Contactless: too isolated to be the next big thing?

John Rozek, director of Polar Moment John Rozek, director of Polar Moment and an influential figure in the payments industry, discusses why he believes celebrating the success of contactless adoption is premature, explaining that it is too isolate to be the next big thing.

Many experts have, in my opinion, been hailing ‘contactless’ as the next big thing in the payment industry far too prematurely. In theory at least, contactless payments offer a quick and convenient alternative to paying by cash, credit or debit card, however, there are still some real barriers that need to be addressed before contactless can experience mass adoption.

The facts

Unlike the introduction of Chip and PIN, where the objective was to combat rising levels of customer present fraud, the main driver behind contactless was to create a new revenue stream for the card schemes and banks entering the ‘battle for cash’. From the outset, there has been a battle to win market share. Many would argue that the banks should have been working together to encourage early adopters and gain critical mass before going into mass marketing mode.

There have been various initiatives to try and get contactless payments off the ground, but none have really succeeded and mass adoption has remained elusive. Despite there being over 20 million contactless cards in the UK, there are still many cardholders who do not know which of their cards support contactless. Many are also unclear as to which retailers accept contactless as a means of payment, and some are simply not interested in using contactless technologies; Chip and PIN works just fine, it’s secure and can be used in all locations. What’s more, in my experience, many checkout operators are not trained in contactless, do not understand how it works or, in some cases, are unaware that they can accept it as a means of payment.

In addition, the current £15 limit, which will rise to £20 in June, is far too low to encourage mass adoption. Many shops have a minimum £5 card limit. This means that consumers will need to spend between £5 and £20. They then need to opt to use contactless; most will just use Chip and PIN. However, raising the limit above £20 will start to attract the fraudsters. If contactless is to gain mass adoption, something needs to be done to address these issues; it is certainly a long way off reaching a tipping point.

2012 London Olympics – what impact will they have?

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’. Visitors will be invited to make contactless payments by card or via a compatible Near Field Communication (NFC) enabled mobile phone. While there has been much talk to suggest the London Olympics will drive contactless adoption, it seems that the extent to which this will happen has been somewhat 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 focussed 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.

Thoughts for the future

It is safe to assume that smart phone users will expect functionality-rich apps that enhance their shopping experience. They are used to being able to make one-touch payments over the internet for sites like iTunes, Amazon and Google. Mobile wallets, however, have the potential to offer much more exciting opportunities than ‘wave and pay’ purchases; I predict these will become the real heavy hitters of the future.

On the whole though, 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.

John 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.

Tweet article
BW on TwitterBW RSS feed