I was able to listen to the Smart Card Alliance webinar today hosted by Stores, MasterCard [1], Visa [2] and VivoTech. The session provided the basics to accepting contactless payments at the point of sale. It was interesting to see the latest updates on what’s happening in the market and get the perspective from a bank issuer, retailer and processor and how its being presented....
I wanted to take this opportunity to summarize the highlights from the webinar as well as touch base on some of the most recent activities.
For starters, the most basic element to consider with contactless payments is that the RFID smart chip is basically an alternative form factor that allows a cardholder to “tap-n-go” rather than the traditional “swipe-n=go”. Because the nature of the RFID chip and its size, it can be embedded into anything from standard payment cards to key fob’s, phones and toys. In the USA, it basically processes the same way as a mag stripe transaction, by reading the chip then passing along the track 1 & 2 data along. For now, the Associations allow most transactions under $25.00 USD to be covered without a swipe, signature or pin required.
Currently major players in the credit and some debit markets have announced their programs. Based on estimations, it could be nearly 20 million cards by the end of 2006 in circulation. (some numbers are posted below)
The issuers include:
- American Express [3] (converting Blue): 2.0 million projected unit
- Citibank: 2.5 million projected units
- HSBC Bank: 1.0 million projected units
- GE Consumer Finance
- JP Morgan Chase: 2.0 million projected units
- KeyBank: 2.0 million projected unit
- MBNA
You also have several co-branding partners and retailers participating with these issuers
Major retailers have updated their POS by either replacing a single POS system that includes RFID capabilities or added a simple and inexpensive RFID device to their existing POS system to accept contactless payments. It’s estimated there are over 25,000 merchant locations that are accepting contactless payment cards and devices. Here is an overview of some retailers and the number of locations supporting contactless payments.
Convenience Stores
- 7-Eleven (5,300 locations)
- RaceTrac (51 locations)
- Sheetz (318 locations)
- Wawa (500 locations)
Theaters
- AMC Theaters
- CineMark USA
- Regal Entertainment Group (558 locations)
- United Artist Theaters
Pharmacies
- CVS/pharmacy (5,400 locations)
- Duane Reade (254 locations)
- Eckerd
- Walgreens
Quick Serve Restaurants
- Arby’s (49 locations)
- Carl’s Jr
- Cold Stone Creamery
- Good Times Burgers
- KFC (50 locations)
- McDonald’s (13,500 locations)
- Subway
Sports Venues
- FedEx Filed
- Giants Stadium
- Lincoln Financial Field
- M&T Bank Stadium
- Qwest Field
- PGA Tour / Prom Catering
Other
- Boater’s World
- Fry’s
- Meijer Stores
- Ritz Camera (1,100 locations)
- Sony Style
- USA Technologies (vending)
Some of the benefits for supporting contactless cards include
- The technology provides a legitimate alternative to replace cash through speed and convenience
- Acquire new customers at retail and for issuer (credit and debit)
- Improve retention and usage
- Drive new revenue growth
- Take cash and handling out of the store
- Improve operational efficiency
- Increase spend
- Increase loyalty and repeat visits
For competitive positioning from a bank’s view, contactless technologies provide many advantages. It also is an enabler to what customers are looking for. According to Study on Consumer Payment Trends and Preferences:
- 40% less people carry cash than 5 years ago and 77% do not want to carry cash
- 63% said they would like to use a contactless card
- Most likely population to use a contactless card
a. 18-34 year olds and 45-54 year olds
b. annual household income of $75,000 or more
c. College or graduate school education
Here are some of the key notes from a retailer’s perspective in launching a program:
- Strong project management is critical
- Develop and “sell” the business case
- Identify suppliers including bank and association partners along with equipment suppliers
- Put good contracts in place
- Manage logistics of ordering, distributing and installing equipment in-store and at pumps
- Upgrading POS software and working with merchant processors to upgrade processes
- Upgrading pump and POS interfaces
- Coordinate third parties
- Develop and implement strong training, marketing and PR programs
- Stay on schedule and within budget
I hope this updated recap was helpful. If you would like to understand more about the contactless market and how you can implement a program, you can contact me by calling 512-246-9301 or reading more at JCO Group.com [4]
Jeremy Drzal
Please see www.jcogroup.com [5] for more information or you can contact me directly at 512.246.9301 to discuss how I can help you with a business or technology consulting project for payment and fraud solutions
Links:
[1] http://bit.ly/qTHooT
[2] http://bit.ly/p3id5T
[3] http://bit.ly/r9Czrv
[4] ”http://jcogroup.com/pmts-fraud-svcs”
[5] http://www.jcogroup.com
[6] http://www.allcunews.com/taxonomy_vtn/term/168
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[21] http://www.allcunews.com/taxonomy_vtn/term/968
[22] http://www.allcunews.com/taxonomy_vtn/term/1803