Widespread use of contactless payment in the U.S. remains three to five years away because merchants and issuers still lack compelling incentives to promote the technology, experts concluded recently at the Smart Card Alliance’s annual conference in Scottsdale, Ariz.
During a roundtable discussion on May 20, representatives of terminal manufacturers and payments-industry analysts debated the reasons why “tap-and-go” payment for low-value purchases thus far has failed to take off in the five years since the major networks began supporting the technology.
A key problem is the industry’s tendency to expect merchants of all sizes to adopt the technology simultaneously, noted Jacqueline Chilton, a partner with the consulting firm Glenbrook Partners LLC, a Menlo Park, Calif.-based consulting firm. “We often try to apply contactless across all merchants ... when we really need to focus on where there is the most compelling business case,” she said.
For example, contactless offers more benefits for certain types of merchants, such as convenience stores and fast-food outlets, where transactions tend to be smaller and the need for faster checkout is greatest. “If we focus on those channels and get them moving, we will see compelling reasons” for the contactless-payment market to grow, Chilton said.
Contactless payment needs additional lures such as instant coupon redemptions and loyalty features to attain broad adoption, said JC Raynon, director of product management at Vivotech Inc., a Santa Clara, Calif.-based provider of contactless payment technology.
"The payment (function) alone won’t carry widespread adoption of contactless payment,” he said. “If you add more features to it, such as couponing, it becomes more viable.”
And as long as banks and card issuers continue to move slowly in distributing and promoting the use of contactless cards to consumers, contactless payment will languish, said Stuart Taylor, vice president of global marketing at Scottsdale-based payment-terminal maker Hypercom Corp. “While I support a U.S. movement to EMV and mobile payment, I don’t see a specific value proposition in the U.S. for contactless payment,” Taylor said.
Issuers are not marketing contactless payment to their customers, and merchants are not touting contactless-payment terminals at the point of sale, he said. Taylor noted that while his Citibank-issued personal credit card has a contactless feature, he receives no communications from the bank about how and where to use it.
“All of us from the industry side are ready to roll out this thing tomorrow, but until we see a real value proposition” it will lag, Taylor said.
The potential nearer-term arrival of a new type of mobile handset capable of supporting contactless payment, such as Apple Inc.’s iPhone, could speed up the timeline for widespread contactless adoption, Taylor said. “I have no doubt that (Apple CEO) Steve Jobs will eventually (devise) a closed-loop (contactless-payment) system that will drive deployment,” he said.
The penetration and pace of adoption of Apple’s iPhone indicates such an innovation could spur widespread use of contactless payment, Taylor suggested, unable to surmise when Jobs might introduce such technology. “We should be looking at Jobs’ roadmap,” he said.
Beth Robertson, director of payments research with Javelin Strategy & Consulting, concurred that contactless payment will remain on hold in the U.S. until large numbers of mobile handsets are available that support contactless payment, such as those equipped with Near Field Communication.
“I believe mobile is what will drive contactless payment into a wide market application, and that is ultimately the direction it needs to be,” she said.
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