While it is understandable to see the Barclaycard chief espouse the virtues of alternative payments, and in particular contactless/NFC; I feel that we are potentially letting all of the industry hype run away with us!
How long ago was that great franchise Mondex all the rage with its arch nemesis VisaCash? It seems that Prepaid is now the product, but how many are chip based - a few!
Then came contactless with PayPass and PayWave (Visa Wave), another solution for low value payments - others existed for magnetic stripe transactions with no signature/PIN - but now with the added cost of an RFID card - which I may not be able to acquire from my traditional card bureau.
Not long after, we were all caught up with contactless and NFC - let's go back to Cartes 2006 as a case in point - technology and a pretty high total cost of ownership for what are Low Value Payments! Some may argue what are actually Cash displacement transactions.
Displacing Cash
The payments industry is yet to identify the 'holy grail' of cash displacement for electronic alternatives. At issue is the convenience of cash, perceived affordability of cash and to some extent the budgeted security of cash.
One Central Bank continues to openly note cash as the better alternative to many of the consumer payment products available or emerging today - price is at the base of this argument.
Don't get me wrong, I am a supporter of contactless cards in particular - but issued for purposes that initially provide a call to action - Oyster/Octopus etc and then can support other services.
So should banks bother? It is easy for them to issue contactless cards and support Visa or MasterCard in their quest to be the leader in this space - but widespread EMV based contactless reader deployment is far from strong or easy. Moreover, the US version of the technology has plenty of statistics - but what do the retailers really say? Do the transactions per day compared to cash or card add up?
Enter NFC
Now to our friend NFC for the mobile phone. Absolutely makes sense. If I was still living in London, I would have wanted an NFC Oyster solution - bring it on! I know my payments are low value, I can still budget and have control should anything go wrong with the security model.
But mainstream bank payments via NFC? Again, no shortage of media hype including the recent O2/Barclaycard effort or the more interesting Payez model. Yet who has identified a business case for the bank or merchant? The commercial models remain in constant flux, so you could argue that no one really has an operational business case.
You need new phone hardware (consumer challenge, MNO challenge, manufacturer challenge); you need a viable number of contactless readers at retail POS (bank challenge, retailer challenge, acquirer challenge); you need an agreed business arrangement and OTA operation for the sophisticated user (big time challenge) and lastly the Consumer Proposition.
Consumer sentiment
You gave me a PayPass Credit card, yet it still has that mag stripe on it for when I am in most shops or in non-EMV markets. It still has the signature strip, even though I have been asked to use PIN as it is better for me. It has a 3 digit code on the back you keep asking me for when I am online - well occasionally you ask me for it!
Now I am to download an applet to my new phone (assuming my bank supports) on the off chance I have a transaction in a contactless capable merchant and the transaction is within all the required floor limits? (assuming the merchant acquirer saw a business case to do so).
Pragmatics and the Future
We have a long road to travel for payments evolution! It is great to see organisations like Barclaycard at least investing in the future of payments and having a go. Trials do need to truly test consumer and merchant adoption - avoid the incentives of the Mondex/VisaCash days - make them pay for it as is likely in production. It is hard to listen to research from user groups who don't pay.
We are significantly focused on the low value end of the payments spectrum for innovation. Thankfully this is not the only case...We do however need to continue focusing on the less sexy aspects of payments - SECURITY - face to face and online! Loss of integrity of the interoperable model that has been 50 years in the making would make contactless and NFC unfounded in the end.
But let's be frank, we are yet to make EMV a no brainer for everyone and it's certainly not global.