Mar 3, 2008

“Waiving the signature for transactions under $25 just torpedoes contactless.”

Two recent articles highlight the critical problems that contactless faces, which I’ve written about many times over the past couple of years. Now that the problems seem to be widely understood, I find myself writing much less about contactless and NFC payments. What in the world am I going to complain about now?

The Charlotte Observer writes about Visa and MasterCard’s no-signature policy which lets customers swipe their credit cards for purchases under $25 without signing the customary receipt (see You don't need to sign it, sir! Credit-card companies want swipes for small purchases, too).

“Visa and MasterCard tout its convenience, calling it a win-win for retailers and consumers. But the card companies hope it will be a win for themselves, too, as they seek to extend their reach in places like toll booths, taxicabs and car washes.”

In another recent piece, research firm Aite Group says that interchange fee discounts are needed to get merchants excited about contactless, since they’re not excited about any of the other benefits (see Merchants Need Interchange Breaks to Adopt Contactless).

“Most merchants don’t see enough benefit in the speed of throughput offered by contactless technology. Contactless transactions are faster even than cash, according to card-network studies, but may not be fast enough to offer a tangible advantage over simply forgoing a signature and swiping a card. Bank card network rules allow stores in certain merchant categories to process transactions without a signature for payments under $25, the transactions contactless technology is aimed at.”

Contactless has always been positioned on one single merchant benefit: speed. So waiving the signature for transactions under $25 just kills contactless.

The technology can do lots more of course, but has never been positioned in any other way.

1 comment:

Thad Peterson said...

So speed isn't the contactless card value proposition, at least for most merchants, and Mondex killed the concept of cash replacement and micro-payments. So what's left? The core value of any chip technology is its ability to carry data about the cardholder. As in all areas of financial services, it's the data that matters.

Chip value props will eventually evolve to applications that leverage their ability to carry customer information.