The global growth in contactless payments is resulting in some to mourn the death of the wallet. The days of clinking change in your pocket and withdrawing ‘fresh’ notes from an ATM, according to the popular press, are drawing to a close. The purpose of this post is to share what contactless payments are, and why there is so much buzz, or fuss, surrounding them…
What are Contactless Payments?
Simply contactless payments are payments made via a device – such as a debit or credit card, key fob, mobile phone – where both the payer and payee are in the same physical location. There are various technologies enabling contactless payments, and to understand the difference I recommend reading RFID vs Proximity vs Contactless vs NFC. Without getting too techie, its useful to know the most popular technology underpinning contactless payments is NFC – Near Field Communication.
How do you make a Contactless Payment?
Point of sale (POS) devices (i.e. the card reader at the store) and payment methods such as debit / credit cards that have the contactless symbol can be used to make contactless payments. All you have to do is place or press the debit card on or near the store card reader and the payment is made – giving rise to the terms ‘tap and pay‘ and ‘wave and pay‘. The payment is complete. There is no need for you to enter or confirm the payment via a PIN or signature, and of course there is no need for cash!
Each country has their own contactless transaction payment limit – it is currently £20 in the UK. Due to increased contactless payments usage the contactless limit will rise in the UK to £30 from September 2015.
What is the point of Contactless Payments?
According to the UK Cards Association, the benefits of contactless are that its fast, easy and secure. As users of contactless payments we can all see the speed and simplicity benefits, and as retailers faster customer throughput at the check-outs is an obvious goal.
Have a read of the Tech Week Europe article on what industry experts think of plans to increase the contactless limit for further benefits of contactless.
Are Contactless Payments Secure?
The contactless revolution is all well and good, but it has led to many asking Are we sacrificing security for convenience? The main response to the question of security is that contactless cards at least:
- Are based on the Chip and PIN encryption technology that we use for ‘regular’ card payments, and randomly the card holder will be asked to PIN verify some transactions
- Have a low transaction limit
- If a card is stolen, the card holder is protected against any fraudulent use
Lisa Pollock in her FT article Contactless card junkies tap their way to payment addiction cites abstraction as the biggest risk. By that Lisa refers to detaching one from the process of making a payment – i.e. you pay without thinking, and as such the payment loses its value and almost becomes meaningless. Food for thought, eh?
Contactless Payments – Why the Fuss?
Contactless Payments in the UK…
The following stats from the UK Cards Association January Press release (6th February, 2015) tell their own story:
- Spending on contactless more than trebled over 2014, reaching a record £2.3 billion in 2014
- The total spend, via contactless, in 2014 alone was more than double that of all the previous six years combined
- UK consumers used their contactless cards 319.2 million times in 2014, that’s 10 contactless transactions every second
- There are 58 million contactless cards in circulation in 2014 – compared with 36.9 million debit cards and 21.2 million credit / charge cards
- In September 2014, Transport for London launched contactless payments across the whole transport network in London
MasterCard across Europe…
The MasterCard Once you Tap – You Wont Go Back press release reveals that contactless is not just a UK phenomenon, in Europe:
- Javier Fernandez – President MasterCard Europe – is confident of the outlook saying “Europeans are increasingly embracing contactless”
- In the last quarter of 2014 contactless payments increased by 174% year on year, and contactless users increased their usage by 20%
- The Netherlands was the “fastest growing contactless country in Europe”
- MasterCard and Maestro in store contactless transaction percentages were 52% in Czech Republic, 33% in Poland, 18% in Hungary and 17% in Slovakia
- MasterCard or Maestro contactless is available in 38 European countries – 68 countries globally
- 73% of consumers in Germany, Poland, Spain and the UK find the mobile phone a convenient way to pay
Various European Contactless Initiatives…
The EPC Overview on Mobile Payments Initiatives (December 2014) highlights further contactless payment schemes that point to the growth of contactless payments both within specific European countries and across the region….
Apple Pay is Coming to Europe…
Apple CEO, Tim Cook, predicts that 2015 will be “the year of Apple Pay”. Apple Pay has thus far been confined to the US, and the US based evidence is compelling (source: Apple first fiscal quarter conference – 27-Jan-2015):
- Apple Pay, introduced in October 2014, accounts for 2 of every 3 dollars spent using contactless payments on Visa, MasterCard and American Express *
- Apply Pay supports over 750 banks and credit unions
- Apple Pay had over a million card activations during its first 72 hours, and in November 2014 captured 1% of all digital payment dollars *
- Over 200,000 stores in the US accept Apple Pay, with Panera Bread (a US bakery chain) reporting that Apple Pay represents almost 80% of its mobile payment transactions
- Visa Europe’s Chief Digital Officer Steve Perry described Apple’s entry to the mobile payments space as a “..pivotal moment for digital payments”.
- The Telegraph and PcPro have reported that Apple is to launch Apple Pay in the UK in the first half of 2015, and a leaked job posting confirmed the Apple Pay roll out across Europe, the Middle East, India and Africa….
Enough said, eh?
Contactless Payments are Happening…
There are just so many European contactless payment initiatives happening that it is difficult to keep apace with them all. The most recent being the acquisition of LoopPay by Samsung – which is already being touted as the rival to Apple Pay. Overall the key contactless payment drivers are ease and convenience, and while the retail availability is increasing security does still remain an open concern. The jury is still out on how Apple Pay will be received in Europe, but it will certainly help increase the spotlight on contactless payments and with that the competition and quality of the available solutions. In my opinion the availability of contactless payments, the public willingness to embrace the technology and the security of the solution will all increase in time and with it so to will the transaction limit – where these converge will represent the true contactless payments tipping point.
I’d love to hear your thought on this post and especially your experience and use of contactless payments…