In these fast paced days of e-commerce, internet shopping and mobile apps for pretty much anything you can think of (and a lot of things you didn’t) it is a rather sobering statistic that a massive 90% of all payments made in the world today are cash transactions. Although, this varies considerably based on what’s being purchased, by country and by demography.
More, sobering still was that a miniscule 1.7 million contactless transactions, equating to roughly 5 transactions per contactless terminal per month were made in 2010. Why? It’s not for want of recent advertising by the card schemes and providers, one of whom was visibly proclaiming the death of cash (or at least that its use was passé) in similar timescales.
Well from a personal consumer perspective I can see a number of reasons. Until I can buy my newspaper, pay for my taxi, my coffee, my lunch and the odd responsibly drunk alcoholic beverage using a universally accepted alternative, I have to rely on cash. But not because I prefer too! Actually I find cash pretty inconvenient. Despite the Banks supposedly putting lots more £5 notes into their cash machines, I seem to be always stuck with couple of £20 notes in my wallet.
This is usually much to the disdain of the lady who brings the sandwiches into the office, or the taxi driver, and you can forget about asking for change on the bus in certain parts of the country.
Another reason cited as a blocker to the uptake of contactless payments was a perceived risk of fraud or inherent consumer distrust with the technology. The very fact that there is no need to sign or enter a PIN (for the majority of contactless transactions) makes the consumer wary. While I can see this might be an issue particularly with a certain segment of society, I’m not a 100% convinced. Two of the cards in my wallet are contactless, and I accepted this “risk” without even thinking about it. I didn’t ask for them to be contactless they just arrived that way, and as such they pose exactly the same fraud risk whether I use them for contactless transactions or via chip and PIN. I also presume the issuer indemnifies me against their fraudulent use in much the same way as they did for their non-contactless counterparts. Thus, I feel that there is a need for greater consumer education (I would suggest in association with the Payments Council) on the benefits of this type of payment method.
One thing is certain, many more retailers are upgrading their POS terminals, and more card issuers are enabling their cards for contactless payments. Their costs in doing this are not insignificant, but there are some valid advantages and benefits for consumer and retailer alike. The time taken for a contactless payment can be significantly reduced from a cash or PIN enabled card transaction. In future will we see a fast track “Contactless Card Only” checkout line where previously we saw “cash only” ones? Although one word of caution, transaction time will vary depending on the network infrastructure and connectivity available and that for some retailers may be an issue.
Retailer’s will also have to step up their training, as even where I know contactless terminals exist, I‘ve been personally taken down the slower PIN enabled route.
Of course the next big thing is likely to be NFC and payments using your Smartphone (in lieu of a plastic card). The technologist in me is hugely excited by this and I can see some real benefits. I will be able to leave the majority of my wallet content at home and just carry my mobile. I’ll be rewarded by loyalty points, discounts and personalised special offers based on my geo-location. Pre-entered PIN authorisation may eliminate the relatively small £15 contactless limit, while maintaining a single tap and go at the checkout. There are others, but I personally fear that despite much hype mainstream adoption of NFC may be some time away.
While there have been successful trials, there are still too many competing propositions at the moment. In fact not all of them rely on NFC, some rely on bar or QR codes for example. Before the successful widespread adoption, we need a universally agreed and adopted common standard, not only with the payment providers but also with all of the mobile operators. Only then will this be a mainstream payment method that is universally adopted by retailers and available to all.
But coming back to the Cash is King theme for this post, would we all use it? Well no not all of us, but I think a significantly large number would. Look at the Oyster card used in London, by 2010 34 million cards had been issued – and it was used for a massive 80% of journeys. Now critics may claim that this is because of the 40% discount it affords its users. I would argue that this discount is representative of the true cost of cash to the transport provider and the card’s success is also due to its convenience for consumers.
So until I can use my mobile, I’ll have to stick to using my card in the old fashioned non-contactless way and most of the time to withdraw cash from the ATM.
Tags: contactless, Mobile, mobile payments, NFC, payments, payments council
