For all the publicity that has accompanied the introduction of
near field communications contactless payments in the US, it is a
technology battling to achieve a major market breakthrough, a study
by consultancy Aite Group has highlighted.

According to Aite, despite pilots for contactless payment cards
indicating a significant value proposition for issuers, merchants
and consumers alike, merchant penetration of contactless payments
will reach 0.5 percent this year and creep ahead to reach a still
unimpressive 2.5 percent in 2014.

Aite attributes part of the reason for slow adoption of
contactless payments to merchant concern relating to interchange
costs on low-value transactions. But despite merchant concern, Aite
stressed, card networks have provided little incentive for
merchants to implement contactless payment technology, and have
failed to remove the financial barriers that make accepting
contactless payments prohibitive to merchants.

“It is widely accepted that a strategy of proliferation, even at
a loss, is key to gaining traction for contactless payments,” said
Aite senior analyst Nick Holland. “A solution would be for card
networks and issuers to provide a contactless-specific category of
interchange and fees for merchants. Once uptake levels have reached
critical mass and contactless payments are entrenched, fee
structure can be altered to afford networks and issuers greater
opportunity for revenue generation.”