Friday 26 April 2013

The Rise in Awareness of Contactless Payments

Contactless payments seem to have slipped into people’s awareness rather than having been launched with a fanfare in the way that chip-and-PIN payments were. Admittedly chip-and-PIN payments required a significant change in the behaviour of both merchants and consumers (from swiping and signing to dipping and entering PIN) and offered equally significant gains to both in terms of preventing fraud. Contactless payments, by contrast, were essentially a gain in terms of convenience.

The rollout of contactless began in the UK in 2007, albeit restricted to seven London postcodes and a small number of merchants in these areas [1]. Once the solution was confirmed as running smoothly, both in terms of the technology on the cards and in terms of the new requirements for the terminals; card-issuing banks and retailers began to implement the technology across the UK.

At first contactless transactions were limited to a maximum value of £10, which was in line with their intended use as a replacement for cash for low-value, high-volume transactions. This was where they found their initial foothold in the UK market with McDonalds and Pret a Manger both being early-adopters. Barclaycard made use of contactless technology to enhance its product offering. As well as starting to issue standard contactless cards, it also began to issue Barclays OnePulse, a combination payment and London Transport Travel card (Oyster card). This highlighted the convenience both of paying with just one touch and of reducing the number of cards held in consumers’ wallets.

In 2010 the limit for contactless transactions was raised again to £15 and their acceptance by both consumers and merchants steadily increased.

The turning point for the mainstream acceptance of contactless arguably came in 2012. As sponsors of the Olympics, Visa was eager to showcase their most innovative technologies in the “cashless games” and contactless became the star of the show. The speed and convenience of contactless payments became the centrepiece of a mainstream advertising campaign featuring international sprinting superstar Usain Bolt. At the same time, merchants who had hitherto ignored contactless began to reassess their strategy. As well as reaching out to sectors which had traditionally been cash-only (such as London taxis), contactless began to filter into areas which had long accepted cards (such as supermarkets) as a means of speeding up transactions (and thereby reducing queues).

There was a second milestone reached in 2012. London Transport initiated a plan to accept contactless cards in place of Oyster cards [2]. This began with upgrading touchpads on buses to accept contactless payment. At the moment, there are limitations to this in that those who use contactless will pay full fare for each journey rather than benefitting from the fare cap applied to Oyster payments, however plans are in place to correct this.

Moving into 2013, contactless payments seem well-placed to become a fully-fledged mainstream technology. Its speed and convenience have huge appeal to both merchants and consumers.

This post was supplied on behalf of First Data Merchant Solutions, the payment processing partners.

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