Feb 07, 2007Retailers are embracing RFID technology, with a growing number accepting or planning to accept RFID-enabled (contactless) payments in the coming months. Relatively few, however, have a clear roadmap on how to maximize a return on the investment required to adopt the payment technology, according to a new report from the Aberdeen Group, a Boston-based market research firm.
More than 20 million RFID-enabled American Express, MasterCard and Visa credit and debit cards have been issued over the past 20 months to consumers in the United States alone. Last fall, Aberdeen interviewed 160 retailers—most located in the United States, with a few based in Europe or Asia. Of those surveyed, nearly 20 percent said they are already accepting RFID payments.
Sahir Anand, Aberdeen retail research analyst and author of the firm's newly released retail contactless payment systems report, says many of the retailers he spoke with confirmed what credit card organizations have been saying about RFID payments: they shorten transaction times and promote customer loyalty. Still, nearly half of these retailers aren't capturing data related to the purchasing habits of those making RFID transactions, or about the demographics and interests of the customers using the cards. That, says Anand, needs to change for retailers to truly benefit from the new technology.
"Retailers don't know who is using the cards," says Anand. "What are their spending habits?" This is the type of information that retailers can gather by pulling transactional data from RFID payments into the customer data systems that most already use to analyze the spending habits of customers who use magnetic-stripe payment cards. In some cases, Anand says, retailers do not yet have the necessary systems in place to automate this type of data collection from RFID transactions. That's because the data fields culled from payment systems are slightly different than those for magnetic-stripe cards.
According to Anand, retailers should communicate with their customers who pay with RFID cards, to determine their level of satisfaction and analyze their demographics. "This type of information can go into merchandizing, purchase planning and other internal systems," he says, allowing retailers to generate more sales by appealing to the buying habits of card users and increase customer loyalty.
The Aberdeen study also found that 58 percent of survey respondents—who represented a range of retailer types, including grocers, consumer electronics retailers and convenience stores—plan to begin accepting RFID payments in the next 18 to 24 months. Though this percentage is higher than Anand anticipated, he says it shows a groundswell of interest among retailers, based on three main benefits already being reported by retailers currently accepting RFID payments.
The first of these benefits is an increase in transactional throughput, since customers paying with RFID cards move through lines more quickly. This not only leads to more sales revenue, they say, but also greater customer satisfaction. Secondly, the work American Express, MasterCard and Visa have done to standardize their RFID cards to a common air-interface protocol standard—ISO 14443—enables retailers to use a single point-of-sale reader to accept RFID payments with cards from all three credit-card organizations. Lastly, they report, the use of RFID-enabled payments is leading to fewer cash payments, which enables them to keep less cash in their tills. This is considered a benefit in terms of reducing employee errors and theft.
The full Aberdeen report, which includes strategic recommendations for retailers interested in deploying RFID payment technology pilot projects, is available free of charge for a limited time.
