A steak in the ground

[Dave Birch] The news that Boots is going to trial contactless payments suggests that things are about to improve in that world. It’s clearly important for the contactless payments sector that high street brands such as Boots are on board, although I’m not quite how it will work. I’d imagined that Boots will set aside one or two terminals for sandwiches and drinks and add contactless there, because I wasn’t sure what would be gained by adding it to all of the POS locations. But I went in to Boots today and, oddly, contactless had been added to all of the normal POS terminals but not to the self-service quick-checkout areas for buying sandwiches and drinks. Nonetheless, a couple of us bought stuff and the terminals worked fine.

I asked the guying serving me what he though about contactless and he told me that customers were using the contactless terminals and that the customers who used the contactless terminals really liked it. So my random sample of one POS at one store tells me that contactless is gaining ground. Not everyone thinks this.

Much hyped contactless payments may be a long way off from becoming the norm in the UK – despite trials by retailer Boots ahead of a potential roll out at their till-points nationwide – because the recession has delayed both retailers and issuers from investing the technology, finds analyst Datamonitor.

[From Internet Retailing » Contactless payments not taking off as recession curbs retailer and bank investment in the technology]

Hhhmmm. Meanwhile,

According to Euromonitor findings, the spread of contactless card technology has continued apace on a global level through 2010, gathering momentum in markets outside first mover region Asia Pacific. Despite decreased consumer spending and tighter margins for both card issuers and retailers during the global recession, investment in contactless technology is growing as both industry and consumers realize the benefits of contactless products.

[From Euromonitor research finds contactless card growth solid despite global recession – Market Research, Analysis, and Trends Blog]

I’ve no way of judging which of these is the more accurate reflection of the state of play, since I don’t have access to any accurate public figures on the rate of deployment of contactless terminals in the UK or transaction figures, but I must point out that I have started to see more terminals popping up in various places in London.

What remains puzzling to me, though, speaking only as an observer, is why contactless remains absent in locations where cash is a nuisance, such as the vending machines on the London Underground. I mentioned before (in the Parable of Woking) that the car park that I use most is probably lost to cards — contactless or otherwise — forever now, since the card slots have been disabled…

The future’s so bright I gotta wear shades. People seem to happily pay the 40p convenience charge for not using cash here, so presumably there is a convenience premium for contactless that can help to spread to the technology. But wait: a correspondent writes…

“Yesterday I went to buy my weekly steak and when paying for purchases less than GBP 10, my butcher says he needs to charge an extra 50p. I really don’t get this. Why is there a minimum payment? And does this not fly in the face of low value contactless payments the you guys are pushing. WTF?”

My response to this would have been to put the steak down and go and buy it somewhere else, but I can see my correspondent’s point. Where does the surcharge come from? The interchange on contactless transactions (currently under GBP 15) is probably around 4p, so if the butcher installed such a terminal he would not only speed up the POS but be able to offer a reasonable deal to his customers, who want to pay with debit cards. One approach might be the “broadband” angle being considered by the Dutch (I’ll blog about this shortly), whereby these kinds of smaller retailers pay a monthly flat fee to cover the terminal rental and broadband connection, and this fee includes the MSC for all contactless debit transactions, thus (hopefully) aligning the private and social costs more efficiently (it’s better for society as a whole if people use debit cards rather than cash).

But how come the car park can charge 40p for not using cash and it doesn’t bother me, whereas it would really annoy me if the butcher charged me 40p for buying some sausages without cash? It must be something to do with the user experience. At the station I’m not just paying extra to not use cash, I’m paying extra to sort out my parking while I’m walking to, or sitting on, the train. It’s not the payment transaction that is enhanced by going cashless but the value-added around the payment transaction.

Talking about user experience, I wonder if the uptake of contactless payments might accelerate if, in addition to being available in useful places, the overall user experience in purchasing were improved. The user experience is currently, I think, rather poor. Typically, it goes something like this…

• Thirsty Person in Hurry (TPIH) — such as, for example, me — goes to counter in Pret a Manager and presents a delicious bottle of some form of fruit juice.
• Pret a Manager Assistant (PAMA): “That’ll be £1.60 please”
• TPIH taps contactless card against dead contactless reader. Nothing happens.
• TPIH: Can I pay using contactless?
• PAMA: Oh, OK.
• PAMA presses a button somewhere on their till. After about 20 seconds, the terminal lights up and displays “£1.60”.
• TPHI taps and goes.

Why can’t the terminal just light up automatically, and then if you pay cash, since the assistant has to press a button to open the cash register anyway, have that same button turn the contactless reader off. By doing it this way round, the user experience is transformed.

• TPIH presents a delicious bottle of some form of fruit juice.
• PAMA: “That’ll be £1.60 please”.
• TPIH taps and goes (and, in my case, Barclaycard e-mail me the receipt).

Meanwhile, I continue to enjoy using my sticker-enhanced iPhone, as shown in this short video. I used it again today in Pret a Manager. Once you can get them to light up the terminal it works splendidly. Even though I had cash in my pocket, it was still easier to wave my iPhone to pay. In fact, I’ve decided that I’m never going to use cash in a coffee shop ever again — which means I won’t be going to Starbucks any more except to use the free wifi, because I’m going to reload my sticker instead of my Starbucks card — because I had another bad experience yesterday. Having obtained a £5 note in the morning, when I went to grab a bottle of water before venturing down the tube, I reached into my pocket to get the £5 to pay WH Smith on Waterloo station and it had gone. I searched all my pockets and my bag. Gone. I must have dropped it when I was getting on the bus. So I was £5 out of pocket as well as late. Damn the Bank of England and its evil spawn, M0.

By the way, our friends at Prepay Solutions have kindly given me one of the above mentioned (and above pictured) reloadable prepaid PayPass stickers — preloaded with £10 for you to enjoy coffee and a cake on them — for me to give away on the blog. So if you want to have some fun in EAT, amaze onlookers in Pret or attract attention in Caffe Nero by sticking one on your phone (or, in fact, anything else) and using it to buy stuff, all you have to do is be the first person to reply to this post with the name of the town in Florida where MasterCard (with the help of Consult Hyperion, I’m proud to say) trialled the first live PayPass cards back in 2003 and I will cheerfully send it to you.

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