More merchants are adopting contactless payments as the technology continues to take hold among consumers, but more will need to be convinced if the trend is to hit a tipping point, experts say.
This comes as the Commonwealth Bank announced this week that its contactless payments had quadrupled in the past year to 1.3 million during the month of December, adding that near field communication (NFC) readers had also increased to 30,000.
“Contactless is not necessarily a new technology. It’s becoming more ubiquitous in terms of card rollout and additional devices. It’s really still some of the cool form factor that’s driving some of our take-up,” Commonwealth Bank head of transaction banking solutions Nick Aronson said at the Near Field Communication World conference.
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But Telsyte research director Foad Fadaghi says while the technology is growing, it’s going to take more time for more merchants to get on board.
“Not all businesses have these facilities yet, and there are still some issues around what the value for merchants is at the moment, and whether it’s worth having that technology operate in stores.”
While many chains are now operating contactless payments – such as McDonald’s, the major supermarkets and 7-Eleven stores – Fadaghi says for smaller, independent shops, it can be a problem.
“I think contactless payments have to be financially compelling, and if it allows businesses to save money then they’ll do it, or if they save on fees and so on.”
“But this is still a credit card transaction, and subject to fees, and many merchants just prefer cash. There is a key balancing act here as to whether the merchant decides if it’s better for them individually, and if it takes away more of their cash business.”
NFC technology has been growing steadily in both the United States and Australia, with more merchants now accepting contactless payments. More smartphone makers are now including NFC technology in their handsets and Google has even introduced an NFC app that allows users to pay with any credit card they like.
This week, Aronson said at the NFCW conference that smartphones accounted for nearly a third of connections to the net banking system, and noted most of those connections are coming from Apple products.
The Commonwealth Bank introduced a new case last year that allows users to make NFC payments with their phones.
“We’d like to give the cases away for free but those of you who have dealt with Apple know that’s not a realistic business model because of the amount we have to pay Apple,” he said, according to The Australian.
Many analysts believe NFC adoption will take off once Apple introduces NFC into its handsets, without the need for a case, at which point a universal contactless payment solution could become more popular.
But Fadaghi says the barrier to more common acceptance of contactless payments won’t be technology, but the merchants themselves.
“This is not going to be an issue of technology, but rather consumer acceptance and, more importantly, acceptance from vendors and merchants.”