Article

Contactless payment equals time and money saved

When compared to the time it takes to write a check, swiping a traditional credit card is blisteringly fast.

January 22, 2006

When compared to the time it takes to write a check, swiping a traditional credit card is blisteringly fast. Untold hours have been saved for merchant and consumer alike by the gradual shift toward electronic payments at retail.

But in those businesses where every second counts, shaving just a few more seconds off a transaction time can snowball into savings of millions of dollars. It is this urge to get customers served and out the door faster that is leading many companies large and small to consider contactless payment systems.

The latest retail giant to take the plunge is the 7-Eleven c-store chain, which operates 5,300 stores in the United States. The chain recently announced that all of its stores would be equipped to accept the "blink" card from Chase Bank. Chase has begun delivering the new cards, which consumers simply hold near or "tap" on a terminal instead of swiping, to 1.3 million users in Texas and Florida.

"Because 7-Eleven is synonymous with convenience, anything we can do to improve a customer's shopping experience at our stores is always under review," said 7-Eleven's vice president of business development Rick Updyke in a news release. "Chase cards with blink provide customers with a faster, easier transaction. It fits well with 7-Eleven's strategy of providing consumers quick, convenient service."

Fast food, faster

One of the industry segments that appears most drawn to contactless is foodservice. A contactless transaction can be 8 to 10 seconds quicker than a swiped transaction.

Pizza Pizza, the largest pizza operation in Toronto with 180 locations, took the contactless plunge in June 2005. Pat Finelli, Pizza Pizza's vice president of marketing, said the company had been seriously looking at the technology since the year prior.

"We tailored the program to meet the needs of our key consumers — urbanites from 18 to 30," he said. "A multifaceted marketing program supported the launch and helped to get the word out among this demographic."

Finelli said consumers were quick to adopt the new technology, and from anecdotal feedback, "both our consumers and franchise partners appreciate the added convenience, speed and simplicity of the program."

"Contactless payments are about speed and convenience, which benefits consumers and merchants," said Tom O'Donnell, senior vice president, Chase Card Services. "With contactless payments, consumers don't have to waste time fumbling with change, but can quickly present their card, pay for their goods and be on their way."

He said that the average contactless transaction is 10 to 40 percent shorter than a swiped one.

But how do you get customers excited about yet another card, when wallets and keychains are already bulging with plastic? In the case of Chase blink, the contactless hardware is integrated into a traditionally shaped card, which also features a magnetic stripe — so the card can be used at any payment terminal, not just those equipped to read blink.

Small transactions like food or gas seem to be the biggest target for contactless schemes. Catherine Graeber, principal analyst for Forrester Research, said that other ideal uses would be video stores, movie theaters, newsstands and transit ticketing.

As such, she doesn't worry about security concerns floated during early discussions about the technology — "sky-is-falling" worries about thieves being able to read the card in your pocket by standing next to you with a wireless device in theirs.

"Personally, I feel that because contactless cards are typically authorized for small dollar amounts, it doesn't seem like fraudsters would find this a highly attractive target," she said.

However, consumers might disagree — Graeber said that of the consumers surveyed who have yet to use a contactless card, 24 percent were worried about fraud, particularly if the card is lost or stolen.

What needs to happen?

Graeber said that contactless payment methods have a great amount of potential, but are by no means a guaranteed "slam-dunk." She said three things need to happen in order for the technology to succeed.

The cards need to be interoperable. "MasterCard, Visa and American Express can't each do their own thing, requiring the merchant to have multiple card readers."
A sufficient number of merchants need to sign up. "The card associations and card issuers need to get a critical mass of merchants in a concentrated geographic area to accept the cards. Smart cards were a dud because there was no place to actually use the cards."
Security promises must be made. "Card issuers need to offer a security guarantee that offers zero-liability on lost or stolen cards, or unauthorized access to accounts."