[Dave Birch] The German Savings Bank Association are to launch a contactless e-purse for low-value payments in 2011. The project takes the highly unsuccessful Geldkarte, which is on every debit card but rarely used, and adds a contactless interface to give it a convenience boost. They are targeting transactions under €20 (which will be without a PIN) although in the future they will extend the scheme to larger transactions (which will be PIN verified) and expect the scheme to be more popular with German retailers than Visa or MasterCard contactless payments because it is cheaper and simpler (they say). Germany has, historically, been seen as being a rather conservative retail payment market but in addition to the savings banks’ son-of-Geldkarte, the German telcos are also launching their own new contactless payments scheme, but using stickers.

Major German telcos plan to hold a trial next year using contactless stickers that would enable subscribers to tap their phones to pay in stores with the telcos’ mpass payment service that is now available only for purchasing on the Internet.

[From German Telcos To Launch Trial of Their Own Payment Scheme in 2011 | NFC Times – Near Field Communication and all contactless technology.]

The trend to stickers, incidentally, isn’t confined to Germany.

U.S.-based mobile-payment start-up RFinity is adopting passive-contactless stickers for its payment project in and around a university campus in Idaho, changing an earlier plan to expand its pilot using contactless microSD cards… RFinity and Bling are among a host of start-ups hoping to take businesss from Visa Inc. and MasterCard Worldwide and major banks in the budding mobile-payment market.

[From M-Payment Start-Up Trades MicroSDs for Passive Stickers | NFC Times – Near Field Communication and all contactless technology.]

Never mind contactless, some German retailers have already been looking beyond it to the next technology revolution in retail e-payments, biometrics. Specifically fingerprints.

“This is an interesting system for the future with a high security standard. There will never be a system that is 100 per cent secure,” Binneboessel said, adding that using a fingerprint payment method is as secure as using a PIN… “On average paying using a fingerprint takes only seven seconds, paying with a bank card that requires a PIN takes 12 seconds and paying with cash takes 20”.

[From German grocery stores experiment with payment by fingerprint : Technology]

See how the report talks about security but then cites speed as the main benefit of switching to the technology. Talking about security, some customers have security concerns about contactless technology. When Discover did a trial with contactless payment stickers, they found that users were quite security concsious. They wanted to put their stickers inside the cover over their mobile phones and…

Few said they would want their name or account number printed on the sticker.

[From U.S.: Discover Pursues Contactless-Mobile Strategy With Sticker Trial | NFC Times – Near Field Communication and all contactless technology.]

I don’t want my name or account number printed on my bank card either, but there you go. Anyway, the point is that stickers were seen as being an interim technology, just there to fill in until mobile proximity handsets arrived. Which, by the way, they now have, although in very, very limited numbers. Why the delay? Because the mobile operators insisted on a standard called Single Wire Protocol (SWP) that keeps the proximity interface under their control, and it’s taken a while for the handset manufacturers to get going on this. Samsung have already introduced an SWP phone into their line up (and, indeed, we’ve been using these at Consult Hyperion on a couple of major projects).

The phone for the Telefónica trials, the Samsung S5230, known as the Star or Player One, is an EDGE handset–not a 3G phone. But Samsung said it is one of the handset maker’s top sellers.

[From New Samsung NFC Phone Gets First Trial in Spain | NFC Times – Near Field Communication and all contactless technology.]

These phones, however, need a contactless infrastructure in place at POS to make them desirable for payments. How is that going? Some up-to-date figures on US consumers payments

Adoption of contactless technology also shows promise. Some 21.7% of consumers have adopted contactless debit cards, while just over a quarter hold a contactless credit card. Some 9.5% report having adopted a contactless toll-payment instrument. Overall, those who have adopted any kind of contactless payment device stands at 44.3%, a figure that may seem more robust than critics of contactless payment have supposed. The report, though, does not look at actual usage of contactless devices.

[From News]

This reminds us that contactless payments aren’t only about open-loop payments. Even in the US, consumers are familiar with the technology primarily because of transport and transit applications. The report goes on…

While the report does not touch on contactless payments via mobile phones, it reports that 8.2% of consumers are now using mobile banking to access their accounts, compared to 70.7% for online banking and nearly 85% for ATM or debit cards.

In summary, then, there are lots of people who know what contactless is, quite a few people with contactless cards, but not so many actual transactions. And yet…

that the only real threat to cash on the horizon is contactless payments.

[From Mobile Transfers – Will They Live Up to the Hype? — Counting On Currency]

This is wrong, of course, because the threat to cash will come from mobile phones, but in developed markets they need the contactless rails to run on. So where are those contactless rails? Personally, I think that Forum friend James Van Dyke of Javelin is right, as he generally is, to say that the problem lies not with the market but with the industry. Customers like fast, “touch and go” payments. But they don’t seem to find them as an option in any of the places where replacing cash with the tap makes sense: their parking meter, their coffee shop, their PC: the industry has driven contactless down the path of existing business, existing terminals, existing POS. That’s not good enough.

So why hasn’t contactless got into its “hockey stick”, as they say? Many people agree that the convenience and speed of contactless is a key element in cash substitution at retail POS.

“We offered RFID for two reasons: speed of service and payment convenience,” [Sheetz] said… “the biggest challenge for contactless is getting debit card issuers to issue the contactless option.”

[From Sheetz Tests, Rolls Out New Payment Options]

But is merchants liking the technology enough? Probably not: they don’t tend to invest in soft benefits. In Europe, the industry has started to focus on costs as the key to cash replacement.

One British merchant who did not miss the significance of the interchange cuts is Roy Ford, retail IT controller and head of card strategy for Spar UK, Britain’s largest convenience store chain. Ford figures the lower merchant fees Spar’s stores will pay on debit contactless will make contactless an even lower-cost option than cash, which costs the 2,600-store chain 1.5% to 2% to handle and secure.

[From Lower Interchange in the UK: A Well-Kept Secret | NFC Times – Near Field Communication and all contactless technology.]

The emphasis is mine, but I think it’s worth the emphasis: they will steer customers towards contactless debit because it costs less than cash, not because it makes customers feel futuristic. This is what the issuers feel that they need to do here in order to take a chunk out of the cash market: but remember this is a sub to merchants, not to consumers. Consumers probably don’t need one, because they like it. This is the focus of a few companies at the moment, because it may well be that at the reduced charges necessary to get the retailers to accept contactless, there’s no margin: hence there’s a need to find value-added propositions around cash replacement and charge the merchants for them (if necessary, perhaps making payments a loss-leader to gain the other businesses). An example is Taggo, Aneace Haddad’s new venture in Singapore.

Now a Singapore-based start-up, founded by a veteran supplier of card-based loyalty technology, has hit upon the idea of using the installed base of contactless transit and payment cards–and later NFC phones–to enable merchants to reward their Facebook page fans for coming into the store.

[From Bringing Facebook Fans into the Store with Contactless Technology | NFC Times – Near Field Communication and all contactless technology.]

This seems to be a fruitful line of thinking, especially when contactless mobile is brought into the mix, because the range of value-added services that might be delivered through a mobile phone is obviously much wider than might be delivered by card. As we discussed before in the context of the Netherlands initiatives to stimulate card use, perhaps the idea of charging anything for contactless debit payment transactions may soon seem to be past its sell-by date.

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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