Consulting .US, reporting on an AT Kearney report, make the assertion that U.S. issuers are leaving billions and billions of dollars on the table in unrealized opportunities that could be achieved if only financial institutions would reissue their cards with contactless technology and enable the ‘tap-and-go’ feature. The gains are to be achieved by replacing inefficient cash transactions with interchange earning card transactions. I am a little suspect. Presumably, since the math is reliant on reducing cash transactions, this means that transactions would more likely be done on a debit card than a credit card. Most debit cards earn a lower interchange rate, so the hurdle is higher. The contactless purchase experience is certainly faster, but with faster chip transactions and the elimination of PINs and signature at the point of sale, I am not sure the incremental improvement in speed at the checkout is as great as it once was, diminishing the need for a new check out process. There is also the problem that about 50% of merchants are not offering the option to use contactless in their stores.
Despite the skepticism, this article and supporting report offers some interesting background and data regarding contactless payments:
A new report from management consultancy A.T. Kearney advises US banks to roll out contactless payment cards since the tech will bring benefits to consumers, merchants, and banks – a win-win-win scenario. The report says that contactless advancement could generate $2.5 billion in incremental card-related earnings over the next five years. The move would also lower cash-handling operating costs for banks, while early adopters could strengthen their market leadership and innovation positions and head off the competition.
Merchants would benefit from providing a better customer experience with contactless tech. Shorter lines and faster checkout, reduced time and money handling cash, and improved information about customer buying behavior are among the incentives for merchants. Consumers would benefit from a convenient alternative to cash for low-value transactions, as well as faster checkouts and the same security as pin-inputting chip cards.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group
