London Sticks Its Toe in the Contactless Payment Waters

 
 
By Evan Schuman  |  Posted 2007-08-16
 
 
 

In mid-September, London will launch its first large-scale contactless payment trial, with some 2,000 retailers slated to participate. Although Europe has more aggressively embraced various wireless technologies than the United States, it has sharply lagged the United States—and certainly parts of Asia—in contactless payment.

"As in many major cities across Europe, millions of people across London use contactless ticketing on public transport. However, when it comes to contactless payments, challenges remain with regard to business models and partnerships," said Jonathan Collins, an RFID senior analyst with ABI Research. "Before many European retailers commit to upgrading their POS [point-of-sale] terminals to accept contactless, they will need to be convinced that the investment is in their interests. Early European rollouts, combined with experience of advanced deployments around the world, will be key."

Next months trial is being coordinated with eight leading U.K. banks—including Barclays and the Bank of Scotland—but its not clear which retailers will cooperate, Collins said. "There are still discussions about which [merchants] will come on board," he said.

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As in the United States, the key draw for retailers is speed and the theoretical ability to process more sales in the same amount of time. The attraction for the banks, though, is even simpler: They want to move a lot of small-currency transactions—typically paid for with cash, thus avoiding any credit- or debit-card fees—to plastic. The merchant challenge: Can the additional revenue exceed the additional card fees enough to make it worth the cost of the technology changes? In London, thats what will actually be on trial.

Security fears also will be playing a role in the London experiment, but not for consumers nearly as much as for the banks, which have agreed to cover any fraudulent losses, Collins said. To minimize risk, the trial will impose a 10-pound (about $19.87) spending limit for the contactless cards.

Retail Center Editor Evan Schuman can be reached at Evan_Schuman@ziffdavis.com.

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