What will contactless ubiquity bring?

[Dave Birch] Barclays commitment to convert all UK debit cards to contactless, given that they already have a large number of contactless credit cards out there, means that the penetration of contactless cards will go up substantially over the coming year. So what will happen? We have already learned some key lessons. For example, we know that transit has a powerful role to play.

For contactless issuance—card acceptance at transit is a big motivator for issuers. It’s a market that is both high profile and also potentially lucrative for transaction volume. This could definitely serve to motivate issuers to ramp up contactless issuance.

[From Javelin Strategy and Research » ViVOtech, Cubic, Mobile Payments and Transit]

And, in the UK at least, the combination seems to be working in the sense that cards are being issued in large numbers and transit operators are looking seriously at accepting bank-issued cards in their gates. I should note, of course, that is not only bank-issued cards in this environment: there are some new players as well, including Forum friends sQuidcard.

E-money start-up sQuidcard has struck a deal with the Scottish National Entitlement Card (NEC) programme and council authorities in Dundee to provide residents with pre-paid contactless cards. The NEC programme is designed to offer Scots access to council facilities such as libraries, schools, taxis and leisure through a single card. The card can also be used on public transport as well as to access thousands of rewards and discounts… Following the Squid tie-up, users in Dundee will also be able to load the cards with money and make purchases of under £10 in retail stores by tapping them against specially equipped terminals.

[From Finextra: Dundee council teams with sQuid on pre-paid contactless card]

On the other hand, the retailers are not, it has to be said, rushing to convert. This is for all sorts of reasons that are not interesting to go into here. Nevertheless, step-by-step, contactless acquiring is spreading.

UK high street retailer Boots is teaming with MasterCard and RBS WorldPay to introduce contactless payments at stores in London and Liverpool… Boots is the first high street retailer in the UK to trial contactless technology, which is swiftly gaining popularity in the country.

[From Finextra: UK retailer Boots to trial contactless payments]

There are some real issues that need to be resolved: it’s not just conservatism or resistance to new technology. For example, there is the issue of the transaction limit beyond which contact and PIN is required.

Opinions vary as to whether the current limit of £10 is appropriate. Dave Birch, director of the consultants, Consult Hyperion, which has been closely involved in all three of the first contactless payment schemes thinks this is a difficult question. “Certainly there is pressure from merchants who want a much higher limit,” he says. “I think that will take a little while though because the banks need the experience of running the risk management models and anti-fraud systems first.”

[From StorageExpo08 Show Preview: FST]

But I think a bigger problem is that many of the places where contactless cards use would be desirable and convenient are not places where banks currently acquire card transactions, are not places where retail POS terminals are suitable and are not places where telecommunications networks are ubiquitous. So I’d love to pay at Woking rail station car park in the morning by simply tapping my OnePulse card against the machine, but I can’t see how it can happen. Meanwhile, the competition is closing in: Woking now has RingGo mobile payments in place, so you can park and then pay on the train on your way to London. Bank-issued ontactless payment cards are going to have to work harder if they want to get into those markets.

These are the kind of issues I’m hoping to see opened up at SMi’s Contactless Cards and Payments conference in London on 22nd and 23rd June 2009. I’m going to be running a Workshop on Contactless and NFC Transaction Security and I’m looking forward to some tough questions and interesting discussions there.

As it happens, the magnificent people at SMi have given me a delegate pass for this event — worth an astounding ONE THOUSAND THREE HUNDRED OF YOUR BRITISH POUNDS plus VAT (now only 15% remember) — to give away on this blog as a competition prize. So if you are going to be in London on those dates and you’d like to come along to hear some of the leaders in the field discussing the world of contactless cards, then all you have to do is be the first person to respond to this post with the name of the American lawyer who is generally credited with the invention of the modern payment card in 1949.

In the traditional fashion, this competition is open to all except for employees of Consult Hyperion and members of my immediate family, is void where prohibited and contains none of the recommended daily allowance of salt. The prize must be claimed within three months. Oh, and no-one can win more than one of the Digital Money Blog prizes per calendar year.

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