Bullish Barclaycard boss Antony Jenkins is determined that his company’s plans to roll out contactless payment will succeed.
It has been a year since trials of the payment technology began in London and although Barclaycard has been quick to sign up consumers for contactless cards, retailers are taking a wait and see approach.
Banking industry association Apacs says it believes about 15,000 contactless transactions are made every month, but it expects this to increase now that the trial period is over.
To put this in perspective, Apacs has revealed that more than 346,000 cards with contactless capability have been issued (158,000 credit and 188,000 debit cards). These can be used at the 6,599 contactless terminals in retail outlets, about half of which are located outside the M25.
Barclaycard has issued about 100,000 contactless cards. However, it wants to see 1 million cards issued by the end of the year and a further 9,000 terminals go live. But even if 1 million cards are in use by the beginning of next year, retailers do not seem in a hurry to adopt the technology needed for consumers to use the contactless function.
One of the few major retail names to have tested contactless payment is Borders. It has installed Barclaycard contactless card readers at its Books Etc stores in London.
Borders chief information officer Simon Thomas told Retail Week that the roll-out was a trial and was easy to do because the stores involved already had card payment devices that were not integrated with the EPoS system. He said the trial has been reasonably successful and well received, but that Borders has no plans to roll out the technology further. In particular, he is not convinced that it is suitable for out-of-town stores.
However, Thomas adds that the new store software that Borders is rolling out will allow for the integration of contactless payment devices at a later date without much extra work and were it to roll out the technology further, it would want it integrated with its EPoS.
Boots is another retailer that is optimistic about contactless payment, although it has not yet confirmed any definite plans for a roll-out. Boots business systems consultant Catherine Curry says: “We are aware of the benefits that contactless payment could offer and it forms part of the options that we’re continually reviewing to further improve transaction time and shopping experience in our stores.”
However, Asda made a statement that echoed the views that many other retailers make off the record. An Asda spokeswoman said contactless payment was “not something we are looking to progress, due to cost and implementation issues”.
The only larger retailer that Retail Week spoke to that would confirm roll-out plans was Spar UK. Spar is adding support for contactless payments to its SparPoS system, which is in use at about 1,600 of its stores.
Spar IT controller Roy Ford says this will happen before the end of the year, subject to the approval of merchant acquirer Streamline. He says: “The development has been done in partnership with BCP, our software developer, and OCI, the makers of the Saturn card reader we have selected. We plan to roll out in London, then follow the nationwide deployment as it happens.”
However, Barclaycard payment innovations marketing director Sarah Mansfield is confident that some big name national retailers will be launching contactless capability in the coming months. In addition, she says that smaller merchants signing up should help it reach its target of 9,000 additional terminals.
Barclaycard has also committed a seven-figure investment to drive take-up by consumers. For instance, last weekend Barclaycard OnePulse sponsored The Mayor’s Thames Festival and gave away 50,000 contactless cards that were loaded with credit to pay for a cup of coffee at a nearby Coffee Republic outlet.
Mansfield says that Barclaycard is sharing its plans for how it intends to drive consumer demand with retailers and suggests that the work the company is doing will encourage retailers that have so far not been persuaded to look again at contactless payment. She says: “I think we will see that as the market makes some dramatic moves forward, retailers will reassess.”
At the same time as this is taking place, retailers are already being asked to give their support to a further development in the payment market – contactless payment integrated with mobile phones.
In early September, O2 announced some of the headline results for the six month trial of a service called O2 Wallet that combines contactless payment and near field communication (NFC) applications on a mobile phone. Barclaycard says that it has been very happy with the results of the trial, in which it was involved.
O2 tested the handset on 500 existing customers, who used it for six months. The applications
available included Oyster, mobile payment with Barclaycard and Visa, access control for VIP entry to The O2 and a touch-tag application for sending information from smart advertising posters to consumers’ phones.
O2 UK head of NFC Claire Maslen explains: “The main point of the trial was to test customer demand. We wanted to test a lifecycle product – a device that had various applications so would become part of their lifestyle.”
Overall, nine out of 10 of those taking part were happy using the technology and 78 per cent said that they would like to use a phone to pay for travel again in future. The results have shown that, for now, consumers are more comfortable using NFC for transport purposes than for paying for goods. However, Maslen says that this is not surprising, because contactless payment is a much newer proposition.
89 per cent of those surveyed were interested in taking up the transport application after the trial, while 67 per cent said it was more convenient than an Oyster card. In addition, 87 per cent said that the availability of the Oyster application would influence their decision to purchase a mobile phone.
However, more importantly for retailers, 68 per cent said that they would be interested in taking up the Barclaycard Visa contactless payment element on a phone after the trial. 41 per cent said that it was faster than paying with cash and 47 per cent said that its availability would influence their decision to purchase a phone.
The participants also said they would like a choice of handsets and Maslen says that O2 would want to create a range of phones that could provide the O2 Wallet concept for a commercial launch.
The mobile network operator’s plan is to launch a taskforce to create momentum and collaboration in the market, with a view to a commercial launch within the next few years.
The taskforce would include representatives across various industries and cover implementation and customer issues, as well as the commercial model. She says that retailers must play a part for a commercial launch to succeed. “We need to get some big UK retailers on board. The taskforce should make recommendations surrounding external triggers to adoption,” she says. “In the UK, we have two or three major retailers and if they were to get on board, there would be a tipping point for this.”
In addition, O2 believes it is essential that any product is based on standards, so that consumers do not end up with a phone they can only use to pay for goods in certain places. Maslen says: “We could launch something now, but we want to work with the other operators. In order to become mass market, we need to work together.”
She concludes: “Enough trials have happened and now we need to move forwards and work out how to launch commercial services.”
Technology research company Juniper Research estimates that by 2013, 700 million mobile phone users around the world will have phones equipped with NFC contactless technology. The company says that there is a significant opportunity for NFC mobile payment service, as the market reaches its tipping point between 2011 and 2013.
However, its report on the subject warns that, while the trial results so far have been encouraging, further adoption in the next couple of years will be dependent on two factors: the availability of NFC phones and the speed of installation of NFC readers by merchants. Both of these factors are dependent on retailers’ support.
While card issuers and merchant acquirers can continue to talk up the benefits of contactless payment, retailers will still play an important role in deciding the pace of change.