Into the future

Twenty years ago making purchases without cold hard cash in your hand would be unthinkable. With the rapidly progressing mobile phone technology and the development of NFC, how long will it be before our debit and credit cards are consigned to the history books?

PayPal has already moved offline and in-store with their PizzaExpress payment app, and they say they have more plans for multi-channel in 2012. John Sullivan, IT director atPizza Express’ owners Gondola Group believes that paying for goods via mobile phones will become more prevalent but the revolution will be a slow one.

He said: “A couple of years ago I don’t think the general public would have been comfortable with paying for something via their mobile phone. Paying for goods on your mobile will become more prevalent as the years go by, but I do disagree with the experts who believe this will be a quick change."

He added that when mobile phone become the payment method of choice over credit cards and cash, it would mean ATMs would have to update mobiles with credit, we will need a mobile device that only works for the owner by using afinger print on top of other technologies to secure the way we pay for our goods.

Mr Sullivan warned this would come at a cost. He said: “I can see banks implementing more standardisation with data and payment processing, which I understand is already being considered. To deliver this the banks will also have to improve their infrastructure so this will come at a cost. I am also sure that the banks are watching what companies like PayPal are doing as Internet payments merge with high street payment systems.

“I can see the use of NFC growing but the problem I have with it, is the cost of implementation”, he added. “High capital costs for hardware and software will limit adoption until the transaction levels increase, which creates a catch 22 situation. What's making adoption more difficult is you need to have both NFC and the standard payment options.”

Barclaycard is already offering its customers the option of using contactless technology to make purchases. Last year it teamed up with Orange to launch the UK’s first contactless mobile phone. It is currently conducting a marketing campaign to let people with contactless enabled cards know what the technology is, how it works, how it makes life more straightforward for them and reassure them that the technology is tried, tested and secure.

It believes is confident that mobile payments will be the biggest revolution in payments since credit cards were first introduced in the UK over 45 years ago and before long, it will be commonplace to see people pulling out their phones at the till, and making faster and easier payments.

Richard Armstrong, head of UK payment acceptance, explained: “Awareness is growing rapidly, with recent research in the latter half of 2011, suggesting that almost half of consumers (44 per cent) now recognise the contactless logo at the point of sale compared toonly a quarter (28 per cent) of people in 2010.

“Additionally, more and more large retailers have begun rolling out contactless throughout their stores, as they have embraced the fact that contactless transactions provide a more convenient and faster means of payment for their customers.”

“Barclaycard has seen huge demand for contactless payments in general, with the number of transactions made by Barclaycard retailers increasing by over 132 per cent year on year (2010-2011), indicating growing acceptance of the technology.

Alan Moss, WEMEA marketing director at secure electronic payments provider VeriFone, argued that, where image, promotions, seasonal pull and loyalty are important, NFC and mobile services will drive footfall with smart apps and engaging new services.

He said: “As we look to the future, payments infrastructure will be less about closing the sale and more about providing tools that touch every part of the consumer’s in-store journey. More than just a queue-buster, mobile payment platforms will deliver added value services to attract custom and boost revenue. Technology such as augmented reality, where you can walk by a shop window and see yourself in an outfit from the store and then go in-store and buy it via your mobile phone - is a great example of how payments and retail technology can progress.

Salman Malik, chief executive officer at Brightpearl,foresees the biggest challenge in the implementation of this technology as beingthe conflict between the banks, mobile networks and handset manufacturers who all want to “own” the customer and gain their share of the transaction fees.

He said: “Customers will ultimately find it safe enough - consumers haven't ever been the barrier in adopting new payment systems: payments over the Internet, through PayPal, even the first credit cards grew quickly because consumers accepted them quickly. Security is something that banks and card companies worry about more-- they are the ones driving chip and PIN, 3D secure and other security technology, not consumers.”

David Britton, vp of Industry Solutions at 41st Parameter, which providers online fraud detection systems agrees that customers would not be put off making payments through fear of crime as the liability for that would remain with their bank.

But there are technologies to detect trends of fraud methods that can be monitored and blocked. “For example in Germany we have seen an increase in fraud routes for things like direct debit transactions of 2 per cent. In the UK the increase in fraud has been 1.2 to 1.3 per cent”, he said.

“I think there is going to be a couple of different directions but I think mobile wallets will be a significant direction as banks offer their own mobile wallet compatibility.”

Meeting customers’ technological demands while deploying new and, in some cases, unproven systems in a secure and reliable environment will the largest hurdle for retailers to jump, according to Mike Bielinski, chief executive officer at Vodat International. He argues that the real challenge will come with NFC in mobiles - already accepted practice in the Asian continent where credit cards have been passed by as a method of payment.

He said: “There are many technology start-ups who see this market as a huge opportunity but not many who have experience of working within a retail enterprise where protecting the brand is of paramount importance- security breaches, inconsistent reliability and financial settlement failures will very quickly damage a brand.”

The UK will be catching up with Asia in making NFC a popular payment choice in the next three to five years, predicts Peter Gough, founding partner of digital agency ORM London.

He said: “There is going to be a race to be the leading mobile wallet providers and it will be an interesting development as the payment gateways and financial institutions will also want to be more involved when it becomes transactional with NFC. That's why the likes of Visa are in an acquisition mode at the moment to make sure they are just as heavily involved and invested in the process.

“I'm interested to see what Apple does. If they suddenly announce that they are to have an NFC chip they will want a big slice of every transaction. They have the funds to acquire a bank, so it’s quite possible that they may do so.”

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