Contactless taps new markets
It’s faster than cash, so what’s taking contactless so long to become a mainstream payment method in the United States? Most payments industry analysts agree that contactless technology, which is easy to implement and popular worldwide, may take longer to be fully embraced by U.S. merchants and consumers.
Thanks to the efforts of card brands and their technology partners, we’ve graduated from early pilots and processor certifications to an affordable family of contactless-ready terminals and peripheral readers. Consumers can confidently tap or wave credit cards, key fobs and assorted devices in lanes and counters across the country.
Slow start for fast payments
So why aren’t more people doing it? It’s taking time for consumers to notice the contactless cards on their key chains and in their wallets and understand the benefits of using this alternative payment method. Retailers have been cautious about adopting contactless technology, too. Best Buy Co. Inc. mandated only PIN-based contactless transactions, leading to the discontinuance of Visa Inc.’s payWave at its stores. Most contactless cards are dual-purpose, supporting both contactless and mag stripe, so currently Visa cards can be swiped, but not waved at Best Buy.
Also, unlike markets in Asia and Europe, where contactless payments are popular, the infrastructure in the United States has dampened contactless adoption because it is built more on mag stripe reader technology than on smart card and microprocessor technology.
Contactless taking hold
The rollout may be slow, but there are signs the U.S. market is ripe for contactless payments. Beyond the faster transaction times, there’s more security and control with contactless payments, because the card, key fob or smart phone used at the POS never leaves consumers’ hands. Contactless is also a more fraud-proof technology: the microprocessor used in contactless payments is harder to hack into than traditional mag stripe schemes. Contactless payments can also be paired with gift, frequency and loyalty programs to create rewards and incentives.
Additionally, along with the success of pilots of Visa’s payWave, MasterCard Worldwide’s PayPass, American Express Co.’s ExpressPay and Discover Financial Service’s Zip, there are ongoing systems integration efforts at the host, carrier and gateway level that will seamlessly fold these and other emerging technologies into a congruent, commercial processing framework. Here are additional indications that contactless acceptance in the United States is catching on:
* Our increasing mobility: The primary game changer will probably be the push to pay by mobile phone. Europe, Southeast Asia and other regions have seamlessly incorporated mobile phone payment transactions into legacy processing infrastructures.
* Killer form factor: Earlier entries, such as the key fob or the credit card with embedded chip, were cool but got lost in the shuffle. We’re running out of room on the key ring and in the wallet. So many plastic products compete for our attention that it’s easy to forget which ones have embedded chips that can be tapped or waved. In contrast, we have only one or two mobile phones. The tipping point will occur when more people realize they can leave their wallets at home.
* There’s an app for that: As we depend more on mobility and connectedness, our mobile devices have become much more than phones. They are compasses that navigate the changing landscape of interconnected mobile enterprises. Our always-on digital assistants help us stay connected through email, social media, geolocation and mobile networks with ever-increasing voice and data capacities. Adding payments to the mix is a no-brainer.
* Enhanced security and privacy: When a mobile phone is used as a contactless payments device, it automatically becomes more secure. The microprocessor contains an identifier that’s linked to sensitive cardholder data, but the details and bank information registered to the device are stored remotely. Transactions are more secure and compliant with most Payment Card Industry Data Security Standard requirements.
* Easy to sell and install: Selling and supporting smart phone transactions is relatively easy. Many countertop terminals and customer-facing devices are already contactless-enabled. Peripheral contactless readers can be added to late-model hardware and virtual processing systems. The function is included in most processing software, requiring only a partial download or parameter change and no heavy investment in equipment or training.
* Continuing contactless initiatives: A pilot program, code name Mercury, involving AT&T Inc., Verizon Wireless Inc., Barclays Bank PLC, and Discover will test smart phones equipped with contactless microprocessing chips at POS readers in select markets in 2011. Consumers will be able to wave or tap their phones to initiate payments. And, in a pilot in the New York City subway system, MasterCard and Visa are testing contactless MetroCards that can be waved instead of swiped at turnstiles.
A trend to watch
Contactless initiatives, the relentless efforts of manufacturers of contactless chips and readers, and the increasing adoption of mobile technology will continue to drive mass acceptance of contactless technology.
The growing contactless trend promises increased adoption of all forms of contactless payments as consumers and merchants become more comfortable with tapping and waving. We’re even seeing contactless options at self-attended venues such as pay-at-the-pump, quick-service restaurants and vending machines. So stay alert; you don’t want to miss this important new wave.
Originally appeared in The Green Sheet, Issue 10:09:02, November 22, 2010.
©Dale S. Laszig, Castles Technology Co., Ltd.
Please include this copyright notice when reprinting this article, and link back to this site when reprinting or quoting.
Crossing the POS chasm
By Dale S. Laszig
Castles Technology Co. Ltd.
Now that 3-D technology has entered our living rooms, older 2-D movies may begin to look dated and flat. Acceptance of the new technology will vary among consumers.
* Innovators will experiment with 3-D software to improve their viewing experience.
* Early adopters will form long lines at retail stores when the newest Blu-ray players come to town.
* Early majority consumers will read Consumer Reports and compare prices before buying.
* Late majority consumers will wait until the industry agrees on a universal standard for formatting and viewing 3-D movies.
* Laggards will make their move when 3-D technology becomes so mainstream that it’s no longer expensive to buy or time-consuming to set up.These are the five stages of the high-tech product adoption cycle. Most merchant level salespeople (MLSs) have seen the same buying patterns among merchants.
Stepping stones
Savvy MLSs understand the importance of fine-tuning sales presentations to each group’s unique buying habits. They recognize each group represents a stage in the product adoption cycle, like stepping stones that lead from one sale to another. Some stones are close together and easy to walk across; others are so far apart that reaching them requires dexterity and a leap of faith.
According to Geoffrey A. Moore in his book, Crossing the Chasm: Marketing and Selling High-Tech Products to Mainstream Customers, the biggest chasm in the product adoption cycle is the one that exists between bleeding-edge early adopters and leading-edge early majority customers.
Bleeding edge
Early adopters are proud to be first to try new technologies. They are willing to endure the slings and arrows, software bugs and hardware issues that frequently accompany product introductions. Moore wrote that by “being the first to implement this change in their industry, the early adopters expect to get a jump on the competition, whether from lower product costs, faster time to market, more complete customer service, or some other comparable business advantage.”
Leading edge
Early majority customers, according to Moore, want “evolution, not revolution.” They look for ways to improve operational efficiencies without being on the “bleeding edge” of technology. Per Moore: “They do not want to debug somebody else’s product. By the time they adopt it, they want it to work properly and to integrate appropriately with their existing technology base.”
The great divide
Progressing from early adoption to early majority selling is easier said than done. Differing priorities and outlooks create the chasm between the two groups, according to Moore. “Because of these incompatibilities, early adopters do not make good references for the early majority,” Moore noted. “And because of the early majority’s concern not to disrupt their organizations, good references are critical to their buying decisions.”
So if the only way to convince an early majority customer is to furnish references, and the only available references come from early adopters, how do we manage the transition? Here’s where dexterity and the leap of faith come in.
When change is not optional
Sometimes new technology is not optional, but mandatory. The Payment Card Industry (PCI) Data Security Standard (DSS) require all merchants, processors and third-party service providers to follow specific guidelines for transmitting, processing and storing cardholder data.
Regardless of where your customers fall in the product adoption cycle, they all need your advice about creating security strategies. If you are promoting an upgrade to a noncompliant hardware or software platform, educate your merchant about the need to meet industry requirements and the consequences of failing to do so.
A leap of faith
Although it may seem a bit challenging at times, bringing new technology to market can be tremendously rewarding for you and your customers. Accept the assignment; you’ll find a way to get it done.
Problem solving
Most customers enjoy complaining, and smart sales people listen carefully when they do. Because when we really listen, we can locate their problems and their pain. Is the problem treatable? If nothing is done, will it get worse? Sometimes the risk involved in doing nothing will outweigh the risk of trying something new.
The art of persuasion
Customers buy for different reasons. Brand loyalty, price sensitivity and special event promotions are among the top three motivators.
* Sell a brand extension to a customer who has been faithful to a product line. Emphasize the similarities between the old and new products. State compelling reasons for why the updates by the manufacturer make the processing platform the same, only better.
* Create special incentives for a price-sensitive customer and demonstrate how the new product or service will save money while improving an existing processing system.
* Limited time offers will create a sense of urgency and resonate with any customer who is attracted to special sales and promotional events.
Take the path of least resistance
The next time your company rolls out a new solution, whether it’s a value-added application or updated hardware or software to meet the PCI DSS, think about your diverse population of merchants and their equally diverse buying habits.
It will be easier to sell to early adopter and early majority merchant customers than to try to convince the late majority and laggards to get on the bus.
Be a change agent
Be aware of the buying habits of your customers, and customize your sales presentations to their unique opinions and perspectives. Then go sell them something. Don’t worry about whether it’s too early or too late. You’re there; they’re listening.
Do some trial closes. The sooner you begin to make the sale, the sooner they will come around to buying. Early adopters will usually get there ahead of the laggards, but you’ll always find some wonderful surprises.
Originally appeared in The Green Sheet, Issue 10:04:02, April 26, 2010.
© Dale S. Laszig, Castles Technology Co., Ltd.
Please include this copyright notice when reprinting this article, and link back to this site when reprinting or quoting.
