[Dave Birch] Yesterday morning I heard the first story on the BBC concerning contactless cards in the U.K. because MasterCard officially launched its contactless ‘tap and go’ payments system, PayPass in London. The BBC coverage wasn’t bad — I particularly liked Forum friend (and head of Strategy at MasterCard) Oliver Steeley’s firm comment:

You can’t stand in the way of progress.

but the radio report I heard spent a lot of the coverage on the security issue. Now, I’m not aware of any figures from either the U.S. or Asia-Pacific that show fraud on ‘tap and go’ payment schemes to be any more or any less than on other schemes (if anyone has such figures, please do share them) but that’s not the point: the point is the focus on what could go wrong — despite the explicit statement by MasterCard that customers will not be liable — rather than an exploration of new opportunities.

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The security question is a reasonable one: why would anyone want one of these cards when anyone else can use it without a signature or PIN? So you can see why 70% of the public believe that contactless cards will increase the likelihood of fraud, with only 15% stating that they were “very likely” to use their card for transactions under £10 (ie, without cardholder authentication). Ron Delnevo, MD of Bank Machine (an ATM operator) says

So far they have run tests in places like bank staff canteens, very sanitised and safe environments… In the real world, there are a number of serious issues

I think that’s a little unfair on places like the U.S.A, which despite some evidence to the contrary are generally considered to be in the real world. People using the 30 million contactless cards already in circulation there seem to like them. Yet the industry does have to answer his central point: surely people will get beaten up and the cards will get stolen, since each one represents somewhere between £0 and £99.99 of easy money to a thief. Or at least a thief that shops at McDonalds, Eat, Coffee Republic, Yo!Sushi and Krispy Kreme (eg, me). Ron detects a hidden agenda:

There can therefore be only one motive behind this new “wheeze” – rather than being about customer service, it’s simply another manoeuvre by the banks to get rid of the cash that they so hate. I find it ironic that so many people fought to keep our British Pound when it was threatened by the introduction of the Euro, yet we have yet to wake up to this obvious ploy to deprive our citizens of the right to use the cash – and £s – that they prefer”.

I won’t comment about the British Pound — since I’m with the Monster Raving Looney Party on this one, in that I think we should invite other European countries to leave the Euro and adopt Sterling — but I have to say that the agenda is not particularly hidden. Why else would banks introduce a new card product if not to get more usage and in the sub-£10 band, that means attracting customers away from cash by providing a better service than cash. In other words, if contactless cards weren’t going to replace cash, why bother with them? The noted strategic thinker Clayton Christensen understood this the first time he saw the technology demonstrated and agrees with me completely 🙂

For the consumer, PayPass is replacing cash, not credit and debit card purchases.

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


  1. Mr. Delnevo also said “public are always told it’s in the public interest, but really this is in the card issuers’ interest, who want to get rid of cash and make more money out of cards and this is one way they see of doing it”
    I think it is true but also unfair to say it. Because, if i’m not mistaken, everybody in this business, including ATM operators (issuers, payment schemes…etc) willing to make more money.
    When it comes to security; it is much more related to the message to the cardholders.
    After “I love my pin” campaign and other stuff, it will a bit hard to tell contactless is secure too.
    I belive,fraudsters will continue their common techniques as of today which is still is very easy. We do have embossing-cvv2 on the cards which you can just write it down and use it thru internet.
    NFC can be an answer to all/ some of the questions, in terms of fraud – why EMV & pin – why contactless

  2. Hype or a new future. The Banks business case is quite simple. If they can get people to spend a bit more with their card then they can easily pay for the technology.
    For the merchant its down to shaving seconds off of the final step of taking payment in high volume outlets. We know that some can easily make that business case.
    But then as one of the previous comments reminds us the UK just did Chip and PIN so why suddenly jump to saying Tap & Go. I think pushing this new technolgoy so quickly after Chip & PIN is asking for trouble.
    Contactless then Chip & PIN both based on EMV, that I can understand
    In the US, PayPass was the first real new think in making payments that actually made sense. They got Consumer sizzle, quick service saw the value and they could talk about enhanced security.
    After all of the USA, Japan and now UK activity I am left with the following questions
    Will this whole contactless NFC thing fall the way of Mondex and Visa Cash?
    Is this that something different that gets the consumer and merchant excited for more than the sizzle period?
    Will transit want to give up the float and pay interchange?
    Can the banks version of contactless meet the 200 millesecond requirement of most transit contactless fare collection systems?
    Will vending machines operators be able to make a business case to install the technology everywhere or only in high volume locations?
    If Mobile phones replace the payment card who wins who loses … Banks, mobile operators, merchants, consumers …
    Maybe this is simply about getting more transactions on payment cards thus allowing the banks to receive a few percent from from even more payments?
    Will the mobile operators and the banks make nice? The banks get the interchange the mobile operators get revenue from payment related airtime and digital bits?
    Will the merchant simply continue to pass these charges through higher prices to the consumer or will they demand the right to charge a surcharge for electronic payments?
    Will the consumer think that the game is about having to pay a fee everytime they make a payment?
    Who will the politicians listen to?
    This is a brave and exciting new world. Maybe we will finally get electronic money (debit or credit), at an affordable price, that we can use to pay for anything at anytime anywhere. maybe even the big dollar lotto winning gets emailed to you.
    The judge and jury are playing with the technology and will either embrace whole heartedly and the smart card/electronic wallet dream will become a reality.
    Or, once again smart cards will have fostered a dream and emptied everyones pockets.
    [Dave Birch] I think the mobile phone makes a big difference to the “new wave” of cash replacement ideas.

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