Contactless needs to and will become more prevalent, but there will be a growing pressure to enable payments above even the impending £30, for which the only hurdle is security, for which the only feasibly fast solution right now that I can see is biometric identification. Anna Milne writes
Having said that, High Value Near Field Communication (NFC) has already launched, allowing customers to make contactless payments on their smartphones for any value just by entering their PIN on their handset.
I’m beginning to think Apple Pay could’ve shot itself in the foot by creating an example that others can simply copy.
The question is whether others can emulate the combination of biometric ID on an NFC device or indeed card- and I don’t see why not. They can certainly implement high value NFC, so they should be able to target Europeans and other regions where Apple Pay is not yet an option but has created a case for contactless; and Android users, who already enjoy NFC capability (as they have done for a number of years).
In this way, Apple may well have served as a leg-up for other vendors, mobile operators and contactless in general. But that is no skin off its back as it is already reaping the rewards of the US release of Apple Pay, which has contributed to the biggest reported profit ever by a public company. That outshines any oil company’s annual profit ever. Even Tim Cook himself said he was staggered by the sheer numbers of iPhones sold.
Contactless payments have trebled in the last year. The UK Cards Association said there was a 255 per cent increase on the previous year’s figure of £653m. Yet they still account for just 2.7% of all card transactions. There is no reason for this rate not to continue, having been given a massive leg-up in the form of London transport network’s appropriation of it across its routes. A further leg-up, and one which will target the crucial market, local independent retailers, will come in the form of British soap appearances later in the year thanks to a deal struck between ITV and Visa.
Do not underestimate the power of British soaps. It is well documented that the electricity surge down to soap watchers boiling the kettle at the end or during the ad breaks of soaps is so large that backup power stations have to go on standby across the country, and additional power is made available in France in case the UK grid can’t cope. And while the majority of small shop owners may not watch the nation’s soaps, it is a safe bet that a lot their customers will, and may start asking.
Small retailers need to adopt this, it will encourage spend as people realise how fast and convenient it is. And the speed of transactions will increase footfall as people may be more inclined to nip in, en route to catching a train, for example. Contactless could save them money on Chip and PIN fees, acquirer-dependent, and could save on cash handling in a number of ways (trips to the bank, staff cash management time). Some newsagents are complaining of ailing footfall in London since the contactless Transport for London roll-out. This could be the thing to bring a few more in.
The latest advice from Worldpay for small businesses says they should switch to contactless if they:
- Sell goods costing under £20.
- Serve a lot of customers at peak times eg café at lunchtime.
- Are worried long queues at the till may be costing the business in lost sales.
- Are upgrading or replacing their terminals.
- Want happier customers
As for whether contactless will cost more or less, Worldpay says it depends on how rates are set up with the payments provider in question, "but accepting contactless is usually cheaper than Chip and PIN for debit cards under £10 and tends to cost the same for credit cards and all sales above £10."
In some cases, where a cash float must be loaded – such as at vending machines – the cost of doing so is significant, and therefore the potential savings offered by contactless are more substantial.
The UK Cards Association advises a reduction in cash may also provide savings due to a reduction in:
- insurance costs;
- cash shrinkage risk (theft and fraud);
- reconciliation errors; and
- errors at POS