[Dave Birch] The outlook for contactless cards continues to look pretty bright, with the 109 million contactless card users expected in the US by 2011. Some recent figures put 2006 spending on contactless cards at $15 billion (which looks like around $7-8K per card to me, which seems a little high) with the percentage of retailers having contactless payment systems expected to nearly triple within two years, so the transaction volume will continue to climb healthily. I don’t say card volume, of course, because they may not be cards. Our friends at Glenbrook have being doing a survey at their payment boot camps asking people how they would like to pay for small purchases (eg, coffee) given the choice between a contactless card, a keyfob, their mobile phone or their fingerprint. The winner? The mobile phone with 46% of votes, followed by cards without signature (27%), finger print (15%) and fob (12%). I think you’d get an even stronger preference for phones outside the US, frankly.

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A key reason why transaction volumes will continue to climb is that contactless payments are very attractive in a vending environment. Even for cans of well-known soft drinks, the convenience of contactless begins to dominate the argument about transaction costs. Since nearly a fifth of US cards are now contactless, vending is going to start going contactless in a big way. The obvious question, given that you’d think it costs more to pay the merchant service charge on a card transaction than to take cash, is why? Well, Rob Balgley, CEO at SkyTek, says “The increase in revenue is substantial where smart cards can be used for incidental purchases, less than $5. Revenue goes up 30 percent to 40 percent,” Why? he says it’s because the vendor now has a lot of information about you and can offer you all kinds of promotional incentives to buy more. He may well be right, but I think it’s because of simple convenience in the first instance.

Mind you, some observers say that a barrier to the take up of digital money in general is that it doesn’t implement the anonymity of cash. So if you buy a Coke (all trademarks acknowledged, naturally) from a machine and the machine says “Thank you, Dave” (or, more worryingly, in a nightmare future Britain) “I’m sorry Dave, I’m afraid I can’t do that” then it might well put me off! For the general public, I suspect, it isn’t a matter of principle about collecting the date (look at the number of loyalty cards out there) but what is done with it.

These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]

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