GUEST WRITER: Contactless payments and the evolution of the customer

Payment innovation has taken many forms over the decades. Back in the 1950s, it was the introduction of Diners Club cards in the US and before that it was Western Union’s ‘metal money’. The first debit cards appeared in the UK in 1987 and then in 1997 consumers got their first taste of internet banking services. This was the same year that saw the appearance of mobile payments, with Coca Cola building vending machines to accept payment by text message. Heads are turning to the next wave of innovation and there are strong indications this will come from Near-Field Communication (NFC).

As a concept, contactless payment is a strong proposition. If consumers can ‘tap and go’, their whole payment experience is simpler and quicker. It’s a big plus for retailers as quicker payments means greater volumes – if consumers have to think less about their payment transactions, they are less likely to question and curb their spending. In short, if it’s easier, they’ll do it more.

Realising the benefits

With several retailers already benefitting from contactless, it is clear this has moved from a concept to a reality. Boots, Superdrug and, more recently, The Co-Operative Group are just some of the retailers to roll out contactless payment terminals across the UK. And the results are showing, with Pret A Manger announcing a 15% rise in contactless payment transactions in their outlets over the past year. 

A good example of NFC technology in action is in the transport sector. Back in 2003, Transport for London (TFL) introduced Oyster Cards as the contactless payment system for the London Underground. Since then, uptake has been high. By June 2012, TFL had issued 43 million Oyster cards and they accounted for more than 80% of journeys on London public transport. TFL has since expanded its use of NFC with the introduction of NFC payment capabilities across the London bus network in late 2012. In the first three months, Londoners paid for more than 700,000 bus fares using their contactless bank cards.


Challenging behaviours

The early successes of NFC show that, deployed in the right way and in the right environment, there is clearly a consumer appetite for this latest innovation. However, despite encouraging figures in the retail and transport markets, some adoptions have failed to replicate their success.  The London Olympics is one such case. Despite the hype of this being ‘the first contactless Olympic Games’, consumers didn’t agree. Visa’s figures showed that just 15% of those with contactless cards chose to actually use them at the games. 

It seems that despite the proliferation of contactless cards, consumers have yet to fully embrace them. At the start of this year, there were over 30 million contactless cards in the UK, according to the UK Cards Association. Figures from ICM Research show that while awareness levels are high, at 80%, only a third of those with contactless cards have ever actually used them. In addition, there are currently over 143,800 contactless terminals in the UK. The capabilities and the awareness are all there, so the question is; what will it take for consumers to make the move from simply understanding contactless to actually using it? 

The answer perhaps lies in our engrained habits as consumers. While consumers may be aware of technology and innovations, it is another task to encourage people to break from tried and trusted processes. Contactless payment marks a shift in consumer behaviour so, for it to succeed, some work needs to be done to eradicate people’s suspicions and encourage them to embrace the new approach. Certain urban myths have emerged that add to the issue. One such myth is of ‘electronic pickpockets’ stealing card details as they simply walk past someone with an NFC-enabled card. While these rumours remain unfounded, they create an air of uncertainty and caution. As such, it is in the interests of retailers, card issuers and payment processors to work together to educate consumers and combat these negative claims. 

Cashiers are perhaps one of the most important links in this chain of education. They are on the front-line of the retail experience and have direct contact with the customer in the queue ready to pay for their goods. Therefore, the cashiers need to be supported so they fully understand their outlet’s ‘tap and go’ capabilities and actively encourage customers to make the best use of it.


Evolving with the times

If we look back over the years, the payment ecosystem has evolved, whether from cash to cards or from in-branch to online, and consumers have ultimately adapted with it. In today’s fast-moving world, it is all about speed and convenience, so perhaps it’s not surprising that we rely so heavily on plastic payment cards – according the UK Card Association, UK consumers spent £3.3 billion more using plastic in December 2012 than in December 2011. Contactless is the natural next step in this evolution and, with the right technology and education, retails and consumers alike stand to benefit. 

By Bernhard Lachenmeier 

About the author – Today’s guest writer is Head of Products and Marketing at SIX Payment Services. His is repsonsible for leading product-management, marketing, communication and market analysis. Lachenmeier also oversees the innovation and product-lifecycle of the entire SIX Payment Services product-portfolio

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