Contactless payment terminals and mobile devices Since the launch of Mobil Speedpass in1997, the first example of a contactless payment system, the global popularity of contactless and mobile payments has grown exponentially.
Mobil Speedpass used contactless payment devices that clipped onto a keyring, with customers waving the device over a labelled square at the petrol pump to pay instantly. Subsequently, McDonalds experimented with Speedpass and a number of other contactless payment technologies. In 1995 the Seoul Bus Transport Association launched the world’s first contactless payment card for bus and rail commuters, which was adopted in cities around the world, including London in 2012. In 2005, the launch of contactless payments across North America began in earnest, with further growth in numbers of issuers, numbers of cards, and merchant locations., While in the UK Barclaycard began trialling the UK’s first contactless credit card in 2007.
Consumers’ increasing reliance on Smartphone apps, as well as online banking which delivers instantaneous services, has helped to reduce their reluctance to accept contactless payment technology, be that via their credit card or phone.
According to analyst firm TrendForce, consumers worldwide will use their mobile phones to spend a total of US$620bn on all forms of mobile transaction this year, representing a 37.8% year-on-year growth from $450bn in 2015. Of course, while consumers may prefer the idea of a simple contactless payment, in order to continue to take card payments, all store-based retailers will have to install contactless terminals.
Current trends While contactless payment have existed in many guises for nearly twenty years, its current popularity and wider acceptance is now gathering pace; with digital wallets, such as Apple Pay and Android Pay, having a significant impact on how we pay for our goods over the coming years.
In May 2016, research from Visa revealed that three billion contactless transactions had been made across Europe during the previous 12 months. The figure is nearly triple that of the preceding 12 months, and contactless payments as a proportion of all Visa-processed face-to-face payments have risen from 1-in-60 in 2013, to more than 1-in-5 this year. The research also showed that European consumers used their contactless cards 360 million times in one month alone – equivalent to nearly 140 transactions per second, and a 150 per cent increase from the 143 million transactions recorded in the same month in 2015. In terms of where this is happening, the research revealed that restaurants experienced the greatest annual growth in contactless transactions (153 per cent), followed by general retail (146 per cent), supermarkets (119 per cent), and food and drink – including fast food (96 per cent).
Research from Juniper Research (Contactless Payments: NFC Handsets, Wearables & Payment Cards 2016-2020) has found that the number of consumers making contactless payments via their mobile handsets will reach 148 million this year. The research also argues that as nearly one-in-five POS (Point of Sale) terminals in the US is now contactless-capable, the infrastructure is now in place for that market to experience traction.
While market players such as Google, Apple and the Samsung battle for market share, as many credit cards are already NFC-enabled the infrastructure is now in place for that market to experience traction. This is especially likely as NFC enables two devices to communicate within close proximity and is therefore considered very secure. For anyone to successfully steal the data, they would need to be extremely close to the payee.
The introduction of Apple Pay has given shoppers more choice in how they make transactions as they can now use their Apple devices, instead of relying on contactless cards. Other mobile payment services have followed suit, including Google Wallet, Android Pay and the Barclaycard bPay wearable devices. In September 2015, Barclays announced it will become the first financial services brand to permit high-value payments on Android devices, enabling its customers to make contactless payments of up to £100 armed simply with their PIN and mobile device.
Future technology developments While contactless payments seem to be the inevitable future of payments, predicting the platform on which it takes place is uncertain - many different technology and payment brands are vying to be the standard. As the payment market is continually changing, terminal manufacturers struggling to keep up to date with a number of different solutions.
From new form factors such as phones and watches, to new acceptance locations, such as vending machines; contactless payment technology is fuelling innovation in the payments industry. Issuers and payment brands continue to introduce an innovative variety of contactless payment enabled form factors, including fobs, mini cards, stickers, mobile phones and wearables (jewellery, wristwatches and wristbands).
However, Juniper Research anticipates that NFC smartphones will be the primary initial driver of contactless payments in the US, given the limited number of cards that currently offer the facility.
The research cites wearable devices, such as smart watches and wristbands, as becoming increasingly important to the contactless payment market, although it predicts that they will still only account for just over two per cent of non-card contactless payments by value in 2018, and will therefore take several years to reach substantial levels. Also, these devices represent a greater security risk than contactless payments via credit or debit cards, which are protected by a secure element.
However, Juniper does believe that smartphones will become ever increasingly important. Its research shows that the nine million Apple Watches that were sold in 2015 were ‘dwarfed’ by sales of NFC-capable iPhones. The report also believes that other manufacturers are now embedding secure elements within their smartphones, suggesting that this approach further weakens the contactless prospects of mobile network operators.
According to the Smart Card Alliance, the rate of deployment of contactless infrastructure is the highest ever observed for emerging payments products and technology in recent memory. Banks are now issuing millions of contactless credit and debit cards to consumers, while growing numbers of retailers install contactless readers.
While contactless payment have existed in many guises for nearly twenty years, there is no doubt that the market is now burgeoning. With service and device innovations being introduced to the market at an incredibly fast rate, and technologies and payment brands fighting to become the de-facto standard, predicting the platform(s) that will eventually take precedence is currently a difficult thing to pinpoint. However, one thing is certain, as current market trends and predictions strongly suggest - contactless is inevitably the future of payments.
TÜV SÜD contactless capability TÜV SÜD provide a number of different solutions for payment terminals, testing to the EMVCo, MasterCard, Visa, American Express and JCB specifications. Additionally we are contracted to provide services under the MasterCard Global Terminal Quality Management (TQM) programme.
We have over 15 years’ of experience in the payment systems market, providing accredited EMVCo Level 1 and Level 2 contact and contactless terminal testing through our UK and Japan laboratories. The products we test range from vending units, electronic point of sale (EPOS), automatic teller machines (ATM) and mobile point of sale (mPOS).