Contactless payment – the way to a cash-free society?

18th October 2012  

For anyone less than au-fait with the term ‘contactless purchasing’, it’s a new way of buying by credit or debit card whereby instead of keying in your 4-digit PIN on your card, the user simply passes the card over a scanner when purchasing goods up to the value of £20 (£15 prior to 1st June). The innovation was revealed to the world in the first half of 2010, but when it did it was more to a rusty bugle than a fanfare.

The symbol

Many people will have had new debit and credit cards issued with the contactless payment symbol and may not even realise what it means.

Banks who seem to be driving contactless retailing at present are Barclaycard (who can forget the advert with the guy on an overhead train that strangely resembled a Big Dipper paying for coffee and a single apple with his card?). Other banks who like the idea and are coming up on the inside to challenge this early front runner are HSBC and Lloyds TSB.

The contactless payment terminals have already been introduced by some (but by no means all) high street retailers. Those currently leading the way in contactless payments are Boots, Tesco, Pret a Manger and M&S. All of these retailers have launched the contactless payment option in their London stores. Retailers who believe in dipping a toe in the water without jumping in include Asda, Waitrose and the Co-Op, who are trialing contactless payment at selected stores.

Cash-free Olympics?

Even though Olympic Park retailers all offered customers the contactless payment option, take up on the new system was very slow. Recently released statistics show that a mere 150,000 transactions were made during Olympic fortnight using the new technology.

People prefer what they know

Remember the furor back in 2006 when retailers would no longer accept payments without the PIN? Yet what happened? We all got used to it and now it works (well mostly). Human beings are creatures of habit – we like what we know and because we know it we like it. Simple. However this does not mean that the new stuff is wrong it’s just…well, new.

The advantages

Carrying less small denomination notes and coins has to be a good thing for the consumer. But of course the credit cards issuers are the ones that really benefit because of the commissions they’ll levy from retailers where previously they would have had nothing if the consumer paid with cash. No longer will you have to shy away whilst covertly entering the 4-digit PIN number in case the guy behind is watching in the queue for a sandwich.

Contactless payments are processed faster too, which is perfect for those small lunch-hour purchases, bus and rail fares, magazines and the like. This is because the authorisation procedure is simpler with the PDQ machine just analysing whether the card is not cancelled or stolen not always making a full check on what the balance of the holder’s account is. Another feature of contactless payment is queue reduction and no more waiting for the person in front to find the right change.

The disadvantages

While some people may worry this acceleration in purchase spend without seeing any hard cash may lure them into overspending on small items, this is no more true than at the launch of the debit card when people worried about exactly the same thing. A number of commentators have raised questions about the security of the contactless payment technology but essentially providing you’re using your card within its terms and conditions and take reasonable precautions any fraud is likely to be down to the card issuer.

It has been mooted that by the end of this year London buses will accept contactless payment across all services, with the rest of London Transport to follow suit next year making it only a matter of time before the rest of the UK falls into line. Contactless payment is here, and it’s here to stay.

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