[Dave Birch] In the Peppercoin Small Payments Roundtable conference call, Mia Shernoff (Executive Vice President, Marketing, Chase Paymentech Solutions) said that in a recent survey of their merchants they had found that cost reduction was no longer the no. 1 requirement for new payment systems. Security and revenue enhancement scored higher.

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The revenue enhancement issue, it seems to me, is being addressed in two ways that were discussed by the call participants. The guys from TSYS and The Bailey Company (an Arby’s franchisee with 59 restaurants) both highlighted the speed of transactions as a critical factor. But a couple of the speakers also echoed a point frequently made by Aneace Haddad on his blog: combining the new technology with some form of loyalty infrastructure gives the merchants a real reason to move toward electronic payments for small transactions. As we’ve observed with some of our clients replacing cash transactions with electronic payments of one form or another is an opportunity for payment service providers to earn transaction fees but also a platform for payment service providers to develop new value-added services: not just loyalty, but integration, reporting and so on.

There was a lot of discussion about contactless in the context of small payments, which as Pam Zuercher (VP, Product Innovation & Coordination, Visa USA) pointed out, are a $2 trillion opportunity in the US. The electronic alternatives to cash have hardly scratched the surface yet. This year, consumers will use Visa cards to buy $60 billion worth of items that cost less than $25 each, a nearly elevenfold rise from 2000. (These figures include purchases on Visa credit cards as well as debit cards processed by the credit card network.)

So there are plenty more transactions to convert.

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