August 29 2007
What's wrong with cash?
This year has seen a host of services launched enabling internet users to pay offline for online purchases. Continuing her blog for the 2008 Retail Business Show, Penelope Ody looks at some of the newer ways for customers to pay (and some old favourites) and how they will impact on retailers in the high street...
It's a rather neat way to pay - or so it's always seemed to me: the US Paypass scheme with its dinky key fob acting as a contactless payment token so all you have to do is brush your car keys against a reader on the petrol pump with no need to insert cards or grapple with instructions on illegible LCD screens in out of hours Stygian gloom.
The Americans clearly like the contactless payment concept and have shown no inclination to sign up for EMV with its chip & PIN. The contactless message is now spreading with the launch of Visa's payWave scheduled for the UK in September.
Visa payWave - according to executive vp marketing, Mariano Dima, is targeted at "...high volume retail environments, such as coffee shops, express grocery stores and newsagents where transaction values are low and speed of service is essential". In London payWave will be combined with the contactless Oyster card used on London's mass transport system.
It's not exactly a new idea: combining mass transport with coffee shop payments was regularly mooted in Smart Card Club discussions almost 15 years ago and has been adopted in various locations worldwide at various times. Those with long memories will still remember the Mondex project back in the mid-1990s which offered an easy way for residents in Swindon to pay for parking and in shops without the need for real money. Consumers, then, proved less than enthusiastic about the "electronic purse" and - with a lack of any international standards - Mondex was soon consigned to the history books.
Visa payWave is not, of course, the only new payment option out there. Companies like Luup are busily promoting the "text to shop" concept where you use your mobile phone to pay for items by registering a debit or credit card, texting a payment instruction and receiving a barcode or ID number that can be scanned at the checkout to transfer payment. Then there is Pay By Touch - another very convenient option for registering your fingerprint and payment card and using that to check out rather than cash or chip & PIN.
The options are certainly proliferating - but it does raise a few questions. First - do people really want to pay by these new assorted methods, secondly, what on earth does the retailer put at the checkout, and third - who pays for the systems upgrades needed?
Exponents of all these technologies - contactless, mobile phone, biometric, whatever - can all produce plenty of evidence to suggest that shoppers like using them. Shoppers also like using cash and didn't seem to object much to signing slips of paper produced by zip-zap machines when they used their credit cards in the bad old days before chip & PIN.
We - shoppers all of us - like convenience and speed. Indeed, there are few things more boring in this chip & PIN age than waiting at the checkout of a small store (as happens regularly in my local greengrocer) for Phil in the back office to stop phoning through his order so that the payment terminal can dial out. Years ago chip & PIN in France was lauded for ending the need for online authorization every time as the PIN provided its own security. Not in the UK version - every transaction seems to be authorized online which has stretched communications systems and encouraged even the smallest shop to switch to broadband.
My second question was what does the retailer put at the checkout? If you are in a tourist area with significant numbers of non-UK shoppers then magstripe will be essential long into the future: US payment cards are unlikely ever to go chip & PIN and other countries are proving equally tardy with EMV migration. Perhaps one day those US cards will even be contactless only.
Visa payWave may talk glibly about express grocery stores, but if you are Tesco, Sainsbury or M&S with food shops at major London railway termini then do you put Oyster/payWave units only at those shop come September - or also at the ones in central London where Oyster-bearers buy their lunchtime sandwiches?
Over to question number three: no major retailer likes to tweak its IT systems to meet the needs of one or two stores. Tweaking them to support a banking initiative is unlikely to be popular. Will Visa pay for payWave readers to kick-start the scheme? On past form it seems unlikely - Visa's pre-launch publicity material actually claims that retailers will benefit as "research in the US suggests that consumers paying with a Visa contactless card spend on average 22% more than those who pay by cash".
It is, of course the classic chicken and egg situation: no retailer (as happened with Mondex) will want to introduce a new payment technology until there are sufficient users to make it worthwhile paying for the technology upgrade and no shopper is going to embrace a new payment option until there are shops where such methods can be used. Throw into the equation text to pay or fingerprints and retailers could be faced with installing a raft of expensive technology in order to satisfy various minority groups of shoppers who want to pay that way.
And as for chip & PIN - well one-time digital passcode devices are already here, PINpad shields are being urgently retrofitted (especially in petrol stations) and even APACS was talking about alternative ID methods at Retail Fraud earlier this year (the speaker even suggested individual gait as a possible biometric). Perhaps cash isn't so bad after all....
