Written by There are plenty of negative stories about contactless floating around (some of them from me) and the experience remains patchy and frustrating. I was thinking about this a few weekends ago, because it was the anniversary of the Olympics, which reminded me of Forum friend Gareth Lodge from Celent when he went off to the Olympic Park to see what was going on at first hand? It wasn’t pretty.
“I asked every till operator that I used, and watched the transactions in every queue I was in, and the results seemed very conclusive,” his post says. “It suggested the vast majority of payments were actually made in cash. In fact, I can recall very few payments made by card at all and I witnessed absolutely none made by contactless, let alone mobile contactless. Even the Visa ATMs were, at the times I passed them, unused.”
[From Digital Transactions]
Well, let’s be clear. Things have improved since then. In the UK, and some other countries (e.g., Poland and Australia) contactless has been growing steadily. It’s getting a foothold in places where it makes sense (e.g., the pub over the road from CHYP End). A good example is Quick Serve Retail (QSR).
contactless payments at convenience food retailer EAT has grown at 75% year on year and currently accounts for 60,000 transactions a month, making up half of all card payments.
[From Contactless Payments and NFC in UK Retail: A Report Précis – IDC Insights]
EAT isn’t alone. Listen to Pret a Manger’s director of IT, delivery and support, Andy Chalklin, He says
“Contactless payments in terms of our overall transactions have gone from single digits of probably between three to five per cent, to about 20 per cent in the last 12 months,” Chalklin told Computing in an exclusive interview.
“As a retailer it is faster, it is a guaranteed payment methodology; it is not subject to charge-back from the acquirer, it is accessible as people forget their wallets at home but not their phones. And, from a retailing perspective, it is cheaper at the moment; it is 50 per cent of the interchange rate of any chip-and-pin transaction,” he said.
[From Pret a Manger sees growing appetite for contactless payments – 06 Mar 2013 – Computing News]
To be honest, I imagine that that last point, the vastly reduced interchange rate, may have more to do with Pret’s enthusiasm than any excitement about ISO 14443 or NFC. We’ll come back to this in a minute.
According to ICM research, a third of people that have a contactless payment card have used it to purchase an item, which is equal to just 8% of all consumers… The ICM research found that from the 11 stores they visited, just three of them were promoting contactless payments.
[From NFCNews | SmartDebit responds to contactless payments useage in the UK]
Why is usage still growing so slowly? Is this all about consumer interia or are there other factors? In the US, where consumers already had no-signature swipe for low-value transactions and no-one is much that bothered about fraud, contactless has a mountain to climb. The set up of the POS, its configuration and ergonomics, mean that there is no advantage to contactless. And in the places where a sealed unit would have advantages over swipe (e.g., parking meters) I’ve never seen it used.
Even cardholders with contactless cards tend to swipe rather than tap.
[From Old Habits Swipe Contactless Adoption From Payments – PaymentsJournal]
But in the UK, where the dynamics are different and contactless has speed and convenience advantages, there’s something else going. It’s one thing for consumers to not understand contactless and not even know whether they have a contactless card or not, but it’s another thing for merchants to not understand contactless. Take a look at the example given on this very blog last week by retail expert Julian Niblett.
I tried to pay by contactless but I was told that my porridge was £1 so I couldn’t use my card and had to pay by cash. I tried explaining that my £1 porridge would only cost 1p in card fees as I had a contactless card and that the next customer using a debit card to spend £3 would cost them 8p! In the same scenario, contactless for £3 would cost half that.
[From A fresher way to pay?]
He points out that not all retailers are as confused, citing the example of Subway. Subway allows you to use contactless for any value transaction, but has a minimum for contact credit and debit. This makes sense (even though I’m sure that marketing experts will tell me that this is too complicated for the average British consumer) but it would make more sense as a sector-wide initiative. Suppose that the issuing banks agree to keep interchange on contactless transactions at a very low level for a reasonable period — like seven years or something — and in return the retailers agree to drop the minimum value requirement for contactless transactions. If consumers knew that they could always use contactless as a cash replacement at all retailers that would be a much simpler message to propagate and we might see a more rapid increase in cash displacement. Simpler is always better, isn’t it?
I tried to buy a round at the CHYP End pub, but it was over the limit. Then I bought a bottle in Australia, but found that Barclays had charged me 31p for the transaction. OK different credit card exchange rate might have been more, but hidden. User experience not good even where merchants are fully up to speed.
With London Trnasport moving to contactless cards soon (early 2014?), surely that will act as a major driver for consumer uptake in that region? In fact why bother with an Oyster card – any thoughts?
The biggest barrier to consumer adoption is the lack of consistency – a lot of effort went into educating the consumer during the introduction of chip-and-pin and the entry of a pin was already familiar to us from use of ATMs. Now we have a payment method where you don’t get a receipt (which personally I hate – I may have paid for a burger or a coffee but there’s so many people milling about in the melee that passes for a queue that I have to elbow my way to the front to claim my purchase when it’s ready – with barely a glimmer of recognition in the face of the person serving me). Not only don’t you get a receipt, but you need to remember that you can only use if below the £20 threshold (which changed from £15! Might it change again? I can’t keep up…) It can’t be used at all merchants. It works with some of my cards but not others. And at the back of my mind I know that the transaction might fall forward to contact – although I’ve not fell foul of that yet. And if I need to refund an item that can’t be done with contactless even if the purchase was contactless. It is not conceptually simple enough.