By Juan Morla, head of electronic payments at CaixaBank
The adoption of new payment technology has been far from uniform across Europe. Scandinavian countries, for example, have traditionally been early adopters of cashless payment methods, whereas other regions have been slower to take on board alternatives.
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But that dynamic is now shifting as different countries come to the fore with payments innovation. Recent statistics showed that contactless payments in Europe grew by 46 percent in the first three months of this year. The research also noted that Spain is one of the leaders when it comes to contactless usage. There are now 3.2 million cards in the market, projected to rise to 7.5 million cards by the end of 2013.
What has led Spanish consumers to embrace new payment technology with this level of enthusiasm? Evidently, new methods such as contactless cards offer genuine added value, bringing both convenience and security to daily transactions. But these benefits are not always clear at first sight. Encouraging individuals to engage with them can be challenging. CaixaBank has consistently pushed forward contactless technology: the bank has issued around 65% of the total number of cards and 50% of point of sale systems. Almost 90% of electronic transactions using contactless technology are made with CaixaBank cards and as a result CaixaBank is responsible for 13% of total turnover using contactless cards in Europe, which gives an indication of the volume of contactless transactions now taking place in Spain.
The popularity of contactless payments in Spain provides an insightful case study of how banks and retailers can take the lead in promoting the adoption of innovative payment methods and create the ecosystem required to move towards more convenient payment systems, which not only benefits customers, but also merchants and the banks themselves. According to CaixaBank statistics, when customers have a contactless card, their purchases under 20 made with electronic payments increase10.8 per cent, and transactions under 5 grow almost 20 per cent. Eighty-six per cent of customers prefer this system to any other once they have tried it.
The first step is for banks to effectively communicate the advantages of new payment technology to consumers and retailers. Contactless payment technology, for example, is highly beneficial to both merchants and customers because it offers both security and speed with transactions. As the fastest card system available, it is particularly well-suited to low value payments, being quicker than paying with cash. For purchases of over 20, cardholders are required to enter their card PIN number to complete the transaction, to address any security concerns should the card be stolen.
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By GlobalDataLow value contactless payments also bring a significant benefit to businesses that aim to serve a high volume of customers in short spaces of time, such as fast-food outlets, restaurants and newsstands. Queue times can be minimised when each customer’s payment transaction is reduced to a few seconds.
The beginning of the roll out of contactless payments in Spain was when CaixaBank launched in the Balearic Islands the largest multi-city deployment of the technology in Europe in 2011.
In 2012, CaixaBank expanded the system to Barcelona and led a joint initiative between the Barcelona City Council, the Metropolitan Taxi Institute and Mercats de Barcelona.
CaixaBank has now expanded the infrastructure to several cities around Spain, including Madrid, Valencia, Alicante, Santander and Pamplona, and the Canary Islands. CaixaBank now counts more than 2 million contactless cards in circulation in Spain. Overall, there are now 200,000 contactless points of sale (107,000 installed by CaixaBank), covering businesses in every sector from petrol stations to taxis, traditional markets and restaurants.
The boom in contactless payments more broadly in Spain opens up a broader spectrum of opportunities in the payments universe. Barcelona and Palma de Mallorca played host to the world’s first contactless ATMs CaixaBank installed, where the user taps their card on the terminal instead of inserting it – there are now 730 in use across the country and they reduce transaction times by up to 30%.
In terms of user experience, contactless payments are meant to be the first step towards mobile payments, for which there are high expectations. While devices with NFC chips are not commonplace yet, banks and technology providers have been inventive about developing alternatives. TAP Visa stickers, for example, can simply be stuck to the back of a mobile phone to immediately turn it into an NFC-enabled device – and they offer the same encryption and security as a contactless card. These allow individuals to become accustomed to the idea of using a phone to make payment for when mobile payment technology becomes more widespread.
Spain is a prime example of how coordination between different providers is essential to driving new payment technology to the next stage, a strategy that looks set to be proven throughout 2013 as an increasing number of consumers become adopters of innovative alternatives.
