Undeterred by previous false starts, new waves of contactless payment initiatives are being unveiled. But getting the banks, retailers, software developers and customers all working in unison is proving difficult.
The concept of contactless payments is not a new one. Passengers on London's public transport networks, for example, have been using Transport for London's Oyster card since 2003. Similar systems are in use across the globe, from Nigeria and New Zealand to Sweden and Iran. The technology is being put to other uses too; passengers on Hong Kong's mass transit system have been using Octopus cards since 1997 to pay for travel and can now use them to purchase groceries, fast food and parking from vending machines and many other point-of-sale applications across the island.
The level of uptake and universality seen in Hong Kong is more the exception than the rule in many regions, although this is not a result of lack of effort on the card issuers' part. Cyberspace is littered with press releases announcing fresh attempts to get consumers paying for purchases with the touch of a card. However, many of these have met with relative failure. Momentum does now appear to be growing, and the card providers have issued unprecedented numbers of contactless cards and are even beginning to trial the technology on mobile devices.
A disinclination among retailers to shoulder the cost of payments infrastructure has been blamed by some for the relative failures of some past attempts at contactless technology. And future efforts could also be stymied by a lack of retail appetite.
Visa, in conjunction with Spanish bank La Caixa and telecoms firm Telefónica, is currently running a mobile contactless payments trial in the Spanish town of Sitges involving 1500 users and 500 merchants. However, 20% of customers in the trial did not make any payments via the supplied mobile devices. According to La Caixa's mobile service director, David Urbano, this was chiefly because not all of the desired retailers took part in the trial.
"The main problem for the 20% [who did not make any payments] is that they wanted to use it in some shops that are not participating in the trial," he says, adding that the merchants participating in the trial had to be La Caixa customers.
UK experience
The retail obstacle holds true in the UK as well, says Stuart Neal, head of payment acceptance with Barclaycard, which along with Visa is currently leading efforts to introduce contactless payments to UK consumers. Mr Neal sees the large food retailers in particular as being crucial to the success of the technology.
"We need the supermarkets on board to reach the next level of adoption," he says. He adds that to get these stores on board with contactless payments, card issuers have to make the first move. "To convince a retailer, you have to put the cards out; and to invest in the hardware, they need to know they'll be used," he says.
So far, a number of UK firms have rolled out contactless payment options, but these have generally been confined to small or medium-sized retailers (mostly based in London), with the top tier seemingly reluctant to roll the technology out beyond a few isolated trials. The card issuers are now targeting these firms, however, says Sandra Alzetta, senior vice-president and head of innovation at Visa Europe.
"The big focus now is on the tier-one merchants; we have learnt the importance of having the big-name brands that consumers can recognise," she says. So far in the UK, supermarket chain The Co-operative has announced that it will accept contactless cards, while Burger King is also to begin rolling out the technology.
Infrastructure issues
For the retailers, however, adopting contactless technology is not always an easy decision, says Chris Hall, head of store takings and primary income at UK supermarket chain Sainsbury's. While Mr Hall expects that Sainsbury's will eventually introduce contactless payment infrastructure, he says it will be part of the usual upgrade cycle and that the firm is unlikely to scrap perfectly functional systems before the end of their natural lifetime. He adds that the technology would appear to be an easier fit when the retailer is opening a new store, however.
Nevertheless, given that most contactless systems require that purchases in excess of a given limit (usually about £20 [$32]) be validated via PIN entry, the technology may not be a huge priority for a store that will see many of its customers making a weekly shop of a value far in excess of any notional limit.
"Our transaction sizes in supermarkets are often too large for [contactless payment] to be a good thing," says Mr Hall. He adds however, that the model could be very useful for a smaller 'convenience store'.
The cost of installing the requisite infrastructure was also a deterrent to Reading Football Club in the UK, which trialled contactless payment technology at concourse kiosks from 2007 in an attempt to curb half-time queuing. The trial resulted in a noticeable improvement in speed of service, says a spokesperson, but financial considerations delayed full-scale implementation. "We were poised to roll it out, but we couldn't justify the level of capital investment required to roll it out across the stadium," says the football club spokesperson.
Going mobile
There is no doubt that contactless technology is moving forward fairly rapidly. Nevertheless, few would argue that the technology has become truly mainstream in much of the world. This has not deterred attempts to introduce what many perceive as the next step in the contactless payments world - combining a payment mechanism with a mobile phone.
It is not hard to see the appeal of the mobile market to card issuers. There are currently 4.8 billion mobile subscribers globally and the number is growing by 1000 every minute. Meanwhile, 3.5 billion are projected to be using mobile internet by 2015.
"We at Visa look at those numbers very jealously," says Mary Carol Harris, head of mobile with Visa Europe.
"It would give us a fantastic ability to grow our business if we could get our cards on a device."
But doing so is not just a case of downloading the latest application. To allow a mobile device to make payments, it must have an internal chip or 'secure element' (similar to those found in a chip-and-pin enabled card) and an antenna to allow it to communicate with the payment terminal. For the card issuers, this can present a sizeable stumbling block, as progress will be governed by the appetite, or lack thereof, of handset manufacturers to incorporate the necessary equipment.
Participants in Visa's Sitges trial, for example, were issued with a mid-range Samsung handset and consumers who already owned a more advanced device were not included in the exercise, says La Caixa's Mr Urbano. "When we selected a customer, we called them and asked if they had an iPhone or a Blackberry; if they did, it didn't make sense for them to take part in the trial, because the handset that they have is better than the one we were going to give them."
This handset situation is an issue that the card issuers are painfully aware of. "Another of the things that we really have to crack to make this thing take off is the supply of handsets," says Ms Harris. "Customers are not going to rush out to a Telefónica shop and switch their mobile phone just because it has payment integrated into it."
Barclaycard's head of research and development, Colin Swain, agrees. "One of the largest barriers is getting manufacturers to adopt the technology," he says.
Bill stickers
There are stopgap measures available, however. Some firms have begun to release stickers designed to be attached to the back of a phone, which then provide it (or whatever else customers choose to stick it to) with contactless functionality.
In the US, Citi launched these payment tags earlier this year, which allows customers to make payments of up to $50 at retailers equipped with MasterCard PayPass readers. In this iteration at least, the sticker is linked to customers' Citi credit card accounts and purchases are included along with conventional card transactions on a monthly bill.
Such an approach may be convenient, but it is a far cry from the 'mobile wallets' envisaged by Visa and Barclaycard, which would include a choice of cards, as well as far more user-customisable options.
This illustrates the biggest barrier to contactless payments, especially involving a mobile device: whatever the appetite of the card issuers, numerous different parties must embrace the technology for it to become truly commonplace.
"Mainstream is a clear objective for mobile contactless [technology], although it is difficult to estimate a deadline as there are a lot of dependencies," says Mr Urbano.
"We need a wide range of compatible handsets and, in addition, we need to develop the merchant infrastructure. We can adapt all our points of sale to contactless but this is not enough."
