Category: Retail

Here’s why.

Consider the example of (and I’m not picking on them: they’re just the last place I used contactless) Pret a Manger, which has forward-facing contactless readers conveniently located at a comfortable height in front of each POS. The payment experience is this…

• Thirsty Coffee Addict Desperate for a Latte (eg, me), or TCA for short: “Large latte please”.
• Helpful Pret a Manger Serving Assistant, or PMS for short: “£1.99 please”.
• TCA taps contactless card against reader. Nothing happens.
• TCA: “Can I pay with the new fast contactless technology please?”
• PMS: “Yes of course”.
• PMS goes back to POS and presses a button or two.
• A few seconds later, the terminal display comes to life and the screen displays “£1.99”.
• TCA taps contactless card against reader and it beeps and flashes green lights.
• Payment is instant, but it takes another 30 seconds to print out a paper receipt that I don’t want.

Here’s how it should work.

• TCA: “Large coffee please”.
• PMS: “£1.99 please”.
• TCA taps contactless card on terminal and it beeps and flashes green lights.
• Receipt is e-mailed to me.

Simple.

Continue reading “Contactless experiences”

First of all, let’s just reinforce the link between contactless and cash replacement. MasterCard’s figures show that only 4% of PayPass “taps” in Europe are for transactions above $50 and the average transaction value varies by country from around $5 to around $14. At the conference, they also gave a good case study on Carrefour and I recently saw an updated version of this case study from someone else. Carrefour have just issued three million contactless credit cards in eight months and upgraded 22,000 terminals take contactless payments. At the time of writing, they are seeing that over a third of their under €20 euro transactions are already contactless (displacing mainly cash) and that they have migrated 6% of transactions from debit to credit (which is, presumably, more profitable for them since it’s their own credit cards). Having said all that, and noted the Visa figures for the UK,

Several payments executives say consumer interest in the technology is falling off, and they blame the banks’ and card networks’ apathy.

[From Has ‘Tap and Go’ Lost Its Touch? – Bank Technology News Article]

I’m not sure I would agree: the “blame” must be more widespread because it seems to me that contactless as POS as it stands is not that exciting. In many of the places where cash replacement would be very attractive (eg, vending machines) there are no contactless terminals and in many of the places where there are contactless terminals (eg, my dry cleaners) they will never be used. In other words, there could be a much better alignment between the terminal deployment strategy and the cash replacement strategy. Other people, though, are suggesting other remedies.

Banks making a concerted push to promote contactless payment technology are focusing on the wrong target and should switch their short-term focus to mobile commerce.

[From Analyst Labels M-Commerce Renaissance a Priority by Bank Systems & Technology]

I draw a slightly different conclusion: banks should invest in contactless payments and in mobile payments on the same roadmap, so that in the time the investments are not wasted. What this means in practice is that the banks (and the retailers) should be planning for a new generation of value-added services that will be enabled by the combination of the mobile phone and the contactless interface.

Continue reading “Contactless update”

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.

Continue reading “A steak in the ground”

• Conventional means to pay gas bill. Phone up with credit card (3%), debit card (10p) or direct debit (4p).
• New means to pay gas bill. Insert Mondex card in reader. Click to download UKP23.45 from bank account to Mondex card. Go to British Gas web site. Click to transfer UKP23.45 from Mondex card to British Gas. Total transaction cost: zero.

Of course, the cost of issuing Mondex cards and smart card readers is amortised to near-zero here. But it doesn’t matter, since none of it ever happened. It turned out that the transaction costs were irrelevant, because getting people to plug a smart card reader into a PC was a huge barrier on the acceptance side and getting banks to put a Mondex application on a smart card was a huge barrier on the issuing side. Customers, however, rather liked the idea of e-cash, and many would still prefer to pay this way.

Research this week from Prepaid Services (that operates Cash-ticket) found that around a third of shoppers would prefer to use cash rather than a credit card when paying for goods online.

[From Untitled]

It has to be easy, and it has to work. But it’s an interesting point to consider with hindsight: why did we make systems such as Danmont, Mondex, VisaCash and use them to compete with cash in the physical world rather than use them in the virtual world where there was no cash? I suppose at the time the world of the Internet was considered a novelty, not central to the world of banking and payments, so the idea of creating an e-cash system specifically for the Internet was considered the province of technology startups rather than banks. That’s not to say that people didn’t try: DigiCash, remember, and there were a variety of other ideas floating around such as Millicent, Hashcash and all the others. At the time, I was on the hardware side of the debate: that is, I couldn’t see how such a system would work in software and assumed that it would be the bank who would provide the tamper-resistant hardware (correct: the chip card) and the interface to the PC. These interfaces never materialised in the mass market, so that they never got a foothold before the falling cost of chips and telecommunications combined with massive economies of scale to give debit cards and unassailable lead at retail POS.

Continue reading “Making a silk e-purse”

Contactless e-Money in Japan (FeliCa chips)

I also looked up the latest consumer responses on “What Japan Thinks” and found that (2/10) some 58% of Japanese consumers carry at least one of these cards and that their three main reasons for using them are:

1. Speed, as you might imagine.
2. Points! It turns out that many of the e-purse schemes offer rewards, presumably funded by the float and/or cash displacement at the retailer POS.
3. Coin replacement, because consumers don’t want pockets full of small change.

As to where they use these products, the top two usage points are transit and convenience stores, just as you might expect. Hopefully, in a couple of years’ time, this will be the same in London. One thing that did strike me as off the curve was that only a quarter of consumers reported using their e-purses at vending machines. I would have expected this to be higher, but perhaps that’s reflecting my own spending patterns: maybe other people don’t buy as many chocolate bars and Cokes on the Underground as I do. What do all of these numbers mean? Well, if you exclude transit, they mean that usage is still low.

The Japanese market is often cited as a success story by proponents of contactless and mobile contactless solutions, where consumers are estimated to make 1.8 contactless retail transactions per month per contactless device, and 4.7 customers make a contactless transaction on each contactless point of sale (POS) per day.

[From Finextra: Gartner takes a swipe at Citi mobile trial data]

Two transactions per consumer per month on average? They’re not going to replace cash any time soon with that kind of penetration. What’s the problem? Well, the POS terminals are expensive (we’ll come back to that below) and, more of a barrier I think, there’s no equivalent of “Square”, so you can’t use e-purses to pay each other. We can learn from this and do better in other markets that are moving to contactless, I’m sure.

Continue reading “Japanese notes”

When I entered what I saw was perhaps the nicest selection and quality of food I had ever seen in the city of Amsterdam, excepting one organic open market (only open Saturdays.) I proceeded to do my shopping with great joy, looking forward to sampling the beautiful organic products on sale. Awaiting me at the counter however was a shock, cash is not accepted at this store.

[From OpEdNews – Article: Cashless Society, Coming Soon to a Store Near You!]

If this is a rare sight in the Netherlands now, it's going to become considerably more common over the next five years.

Dutch supermarkets are hoping to phase out the use of cash by 2014, the Financieele Dagblad reports on Thursday, quoting the retail board CBL.

[From DutchNews.nl – 'Supermarkets set to refuse cash']

France is taking its first steps in the same direction with the successful NFC pilots about to move into national roll-out.

Reactions among 1,000 technophile consumers who signed up for the Payez Mobile trial were encouraging. Contactless mobile payments proved popular with both sexes, and all ages… Nine out of 10 users said they would recommend mobile payments, and 70 per cent of retailers said they would want a terminal if they were commercially available.

[From FT.com / Technology / Digital Business – French take a lead in mobile payments]

To the Brits, NFC may be French letters and it is the Dutch who are planning to cap the use of cash, but one day we will surely follow in their footsteps.

cashless, costs, notes and coins, retail

Continue reading “Only five more years?”