Recent Trends In Card Technology - Contactless Cards

‘Contactless’ has been a buzz-word in the card industry for the last couple of years, but how many people own one, and is anybody actually using them?

Contactless products are designed to revolutionise the way consumers pay for low-cost items.  The technology allows shoppers to make a small purchase without the need for any signature or PIN number.  The card is simply held up to a special contactless reader which automatically registers the payment.  The money is then either deducted from the customer’s bank account or charged to their credit card account.  Alternatives to the card, such as wrist-watches, phones and key-fobs are also beginning to emerge, and are typically used for lower-cost purchases of $30 or less.

In the US, new technology has recently introduced by the US Bank at the Minnesota Twins’ home field.  From May 2010, baseball fans at Target Field can use a pre-loaded Pay Pass fob at any of the participating concession stands to pay for their food and beverage purchases.  Just tap the fob on a reader located at the check-out: when you hear a beep and see a green light on the reader you know that the purchase is complete. No more long lines and fumbling in your pockets for coins!

 In New Jersey, since June 2010 commuters can use a new ‘Tap & Go’ contactless payment scheme on trains and buses of any of the three main local transport agencies, PATH, NJ Transit and MTA. Travelers with MasterCards bearing a Pay Pass logo on the back will be able to tap their card at turnstiles or on special receptors on buses and trains to pay for their rides.

In the UK contactless cards have recently been hyped by TV advertising; one high-profile campaign this summer has featured a happy consumer effortlessly zooming down a water-chute, apparently having the time of his life, and empowered by his Contactless ‘OnePulse’ card, from Barclaycard, which he merely flashes at retailers’ reader machines to continue unfalteringly on his merry way.

In spite of the hype, contactless technology has not really taken off in the USA and Europe.  This is largely down to consumer concerns about security issues: it is understandable that shoppers are reluctant to embrace a payment method that takes place at speed and without the security blanket of a PIN Number or signature.  The credit crunch may also be playing a part in the lack of take-up: the new technology depends of retailers investing in new machines to read the cards and register the payments, an investment that cash-strapped retailers may be reluctant to make in the current economic climate.

In the USA 7-Eleven, numerous sports Stadium retailers, Coca-Cola, and fast-food chains such as KFC and MacDonald’s have taken all it up. Today, there are already over 100 million contactless payment cards in circulation in the USA, comprising around 15% of the national card market.  There are around 9,000 contactless payment points in operation in the UK, and it is estimated that over 1 million contactless cards have been issued to date. Barclays plans to issue a further 3 million to its customers during the course on 2010, and anticipates that most of its cardholders will own one by 2011. Lloyds TSB expect to have issued around 600,000 contactless debit cards by the end of the year, but the process has been slowed due to the merger with HBOS.

But on the whole banks are much more enthusiastic than retailers and consumers, and are hoping that it will help them in their drive to phase out the use of cheques.

The contactless approach seems to have been more readily accepted by consumers in the Far East, with countries like Japan offering contactless payments as early as 2000, and where cards have already been supplanted by devices such as watches, fobs and phones.  In the UK it is hoped that the 2012 London Olympics will act as a catalyst to increases contactless acceptance, by introducing schemes to speed up payments for items such as cab fares and parking tickets.