The Oyster travel card is ubiquitous in London, although somewhat ragged at the edges of the capital’s transport network. Its introduction is widely held to have been a resounding success: everyone knows how to use it (even savvy tourists get in on the act); it offers an incentive to use in the shape of significant discounts; and is integrated with the banking system. This last feature means that, with the right options set up, money is sucked from a nominated bank or credit account whenever the card contains less than £8.
So the UK should be a fertile market for contactless payment cards, right? Wrong.
Retailers that currently accept Barclaycard’s contactless payment cards include Caffè Nero, Coffee Republic, Eat, Pret a Manger, Yo Sushi and Subway, which is great news for cashless snack-hungry caffeine addicts. But compared with other countries, the uptake of contactless payments is sluggish in the UK and consumers don’t show any demand for it.
Turkey, which largely leap-frogged chip and PIN, is considered the poster child of contactless payments. Having to insert your card into a card-reader is viewed with suspicion in Istanbul.
“Everyone uses contactless payment cards in Turkey and merchants are under pressure from consumers to adopt the technology,” says James Ratcliff, editor of Cards International.
Turkey is expected to make the easy leap from contactless cards to contactless payment via mobile phones.
No one in the UK is likely to buy a mobile phone because it has near-field communications (NFC) capability. But once NFC is in all phones as a matter of routine, the convenience of paying by phone may help take-up here, Ratcliff thinks.
McDonald’s is trumpeted as the great game-changer in the UK. The burger chain is rolling out contactless payments across all its UK outlets.
“You can see the sense for McDonald’s: a highly automated environment where food is ordered at the push of a few buttons,” says Ratcliff. “But the staff will have to be trained not just to use the technology but to promote contactless as a way of paying if it is to take off.”
Pret a Manger, McDonald’s’ up-market-ish sandwich brand, has had contactless terminals installed for some time, but the staff never seem to mention it (based on your correspondent’s sample of three outlets over about six weeks).
Independent retailers with a high volume of low-margin transactions – such as newsagents – are supposed to be the sector that would benefit most from contactless payments. But the cost of installing the terminals is prohibitive.
Retailers need to raise their sights above contactless payments to enabling mobile payments in-store as a gateway to full-blown m-commerce, says Ratcliff.
Retailers should give consumers the ability to make an online-style purchase using their mobile in-store so that they don’t have to queue at the check-out, a service which Debenhams offers. The retailer can retain the consumer’s mobile details – with permission – and later SMS offers to entice the consumer back. Then the retailer can build a relationship with the consumer and collect rich data about purchases and preferences, says Ratcliff.
This style of m-commerce will have contactless payment as a service included in the package, and may even start with a contactless payment, but it will extend much further and provide much greater value, he says.
Ratcliff isn’t alone in thinking that the focus on contactless payments is a red herring. In April last year analysts at Ovum published a report that said the economics of contactless don’t make sense for retailers currently, and that banks pushing the technology are focusing on the wrong target and should switch their short-term focus to m-commerce.
“M-commerce acts as a bridge for the consumer to wider mobile activity,” says Alex Kwiatkowski, principal analyst at Ovum and report co-author. “It also provides a way for the payment industry to develop a complete suite of product offerings.”