Just as one study found British consumers to be uncomfortable with the idea of contactless payment cards, other unrelated research determined that they may need to get used to it soon, as retailers and banks across Europe—the largest percentage being in the United Kingdom—prepare to offer contactless payment options over the next few years.
For a report commissioned by Visa Europe, the Center for Retail Research, in Nottingham, England, interviewed 300 large and midsize businesses in seven western European countries regarding electronic payment systems. U.K. merchants were found to have the highest interest in contactless payments, with 65 percent of retailers polled identifying the technology as important or very important. The average of the other six European countries was 44 percent, indicating retailers in those nations showed less interest in using the technology within the next few years.
The report, titled “The Store of the Future 2012-2015,” further predicts that 48 percent of European retailers will begin using electronic kiosks or PDA-type devices for reading contactless cards. The retailers most likely to do so were found to be those in Sweden and Germany, where 53 percent are expected to deploy such technologies.
Still, consumers may take some convincing. According to a survey conducted this past June by emergency-assistance company CPP, 88 percent of the 2,200 British consumers queried had never heard of contactless payment cards, including residents of London, where most pilots and deployments have been conducted. And 77 percent of those surveyed said they feared contactless payments would result in a greater risk from criminals, as well as increased credit card debt—both due to the card’s ease of use.
As a emergency-assistance company, CCP provides assistance to those who lose personal property, such as missing credit cards, passports or licenses, by helping them terminate a stolen card, or apply for a replacement quickly. Customers can also use the services for other items such as mobile phones, by storing a phone’s address book and other data in the event the items end up missing. CPP intends to provide the same services for contactless payment cards as the technology evolves. In other words, those with a contactless payment card can register it with CCP to have the card’s data stored—such as its unique ID number—so CCP can have the account closed before it is used fraudulently, or have a lost card replaced, for a fee.
The survey showed a variety of responses depending on the specific region of the United Kingdom; those in areas where pilots have been deployed, such as London, were less likely to be skeptical of the technology. “However,” says Geoff Barker, CPP’s contactless cards director, “there is little awareness around the United Kingdom, including in London, which has been a bit disappointing. We do a number of surveys, some around contactless cards. The objective of the study is to provide a level of research to develop our own services.”
While taking the CCP survey, consumers who had not heard of contactless card technology were informed as to what it entails. Of this group, 50 percent indicated they would be inclined to try it.
Part of the uncertainty may be due to multiple deployments under various names. “There’s been a lot of mixed messages around branding,” Barker says. The chip-and-PIN cards (contact cards containing a microchip that stores data more securely than a magnetic stripe and is, therefore, more difficult to counterfeit) have been widely accepted, he claims, in part because they are provided under a single company logo. On the other hand, contactless cards have been provided and tested by Visa, MasterCard and American Express with multiple banks and retailers, under such names as MasterCard PayPass, Visa PayWave, MasterCard Tap ‘N Go and One Pulse, to name a few.
“It seems a bit confusing,” Barker says. He predicts that banks and credit card companies will begin to collaborate in the future, releasing contactless card payments under a single name. “From what I see and hear,” he states, “there is sufficient commitment from banks for that.”
Because the economy has been struggling, Barker says, contactless cards have not been released as quickly as had once been anticipated.
Fear of increased vulnerability to fraud with contactless cards, Barker says, is unfounded, however. “You do need to be aware of your cards and look after them as you would look after your cash,” he says, though he adds that “losing a contactless card is not the same as losing a 20-pound note.” That’s because the cards often require a PIN at the time of transaction, and if someone were able to use a card, there would be a record of such transactions, which a bank could then investigate.
The CCP survey also found that nine out of 10 consumers don’t feel there has been sufficient communication from banks regarding this new form of payment. Kevin Smith, Visa Europe’s VP of acceptance development, agrees that there needs to be more education for consumers, much of which he predicts will occur in the coming months and years as more banks provide cards with contactless chips embedded, and as more merchants begin providing contactless services.
According to Smith, Visa Europe’s launch of PayWave in London, in the fall of 2007 (see RFID Payment Platforms Gaining Momentum), proved that consumers adapt very quickly to new technology. Cardholders responded favorably, he adds—not only to the speed and convenience, but also to the innovation of the technology. From that deployment, Visa Europe learned “just how savvy the consumers have become,” Smith says, noting that they had a fairly clear understanding of how the technology worked once they began using it.
In addition to continuing the proliferation of contactless cards issued by banks, Smith says, “the challenge is to continue the rollout at the point-of-sale.” All major High Street banks in the United Kingdom offer contactless cards, he notes, and all have begun trialing them with merchants, most commonly in London.
Smith acknowledges that banks have released their cards under a variety of names, and that this might have caused some confusion, but adds, “We have started with a common foundation, which is the technology.” All contactless-card deployments, he says, are compatible with the various contactless devices installed at U.K. merchant locations. What’s more, all Visa contactless devices and cards are marked with a logo depicting four wavy lines (signifying radio waves) to indicate contactless capabilities.
Outside of the United Kingdom, Smith says, “Europe is catching up fast. Individual markets will move at their own speed.” He sees Turkey, France and Italy as some of the fastest-adopting countries.
Visa Europe has centered its U.K. deployments around fast-food and other high-volume establishments, including coffee bars, dry cleaners and convenience stores, in the city’s high-traffic locations, such as near metro stations.
“Within the next year,” Smith says, “we will see a significant increase in the use of contactless technology in debit and credit cards.” He adds that he expects to see additional merchants using the technology. Visa Europe is presently working with merchants, he says, to alleviate consumer concerns that the use of contactless technology will lead to greater credit card debt. That means promotions, he notes, and improved education through merchants as to how consumers might better control their expenditures being made electronically, due to a spending trail that would not be available if they used cash.
Consumers in Europe and elsewhere are also expected to begin making contactless payments by means of cell phones equipped with Near Field Communication (NFC) RFID technology. A study recently published by Juniper Research predicts that by 2013, consumers worldwide will utilize NFC-enabled mobile phone payments to make low-value purchases totaling $75 billion per year.
With Japan already deploying NFC phones, Europe, North America and parts of Asia are predicted to follow closely behind. According to the study, phone providers will begin selling their products with NFC chips beginning in 2010, with about 20 percent of all new mobile phones expected to be NFC-enabled by 2013.