The payment industry’s push towards
contactless payment has seen payment networks, issuers, retailers
and technology vendors unite in a concerted effort to roll out the
technology worldwide, but it appears that in the US, some merchants
are willing to use contactless as a stick to beat the networks and
issuers over the contentious issue of interchange.
US home entertainment retailer Best Buy, which
has 1,023 outlets, signed up to accept Visa contactless payments in
August 2007 and Visa was not shy about using Best Buy as an example
of the attractiveness of its contactless proposition.
But over recent months, Best Buy has become
one of several major retailers to become increasingly vocal over
Visa’s requirement for merchants to accept signature authorisation
for contactless payment, rather than PIN authorisation which
carries a much lower level of interchange – and therefore lower
revenue for issuers.
Best Buy’s intentions were in evidence as
early as July 2009, when it released a statement saying that it was
evaluating its continued acceptance of Visa-issued contactless
payment cards in its stores in light of recent price increases.
Despite negotiations with Visa, by November
Best Buy had stopped accepting Visa contactless debit transactions
in all of its stores, with the retailer justifying the decision on
the basis of the cost of contactless transactions being processed
as signature debit transactions.
However, the retailer is still accepting Visa
magnetic stripe card payments and contactless payments from rival
networks MasterCard and American Express, which allow
PIN-authorised contactless payments.
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The move appears to have taken Visa by
surprise, as the network was still touting Best Buy as accepting
its contactless proposition as of early January 2010.
Nick Holland, a senior analyst at US payment
consultancy Aite Group, told CI: “The biggest obstacle to EMV
adoption in the US is not the estimated $12 billion price tag for
replacing all cards and POS sale terminals, but the deep reluctance
of card networks to move from signature-based payments to PIN.
“As evidenced by Best Buy’s decision to stop
signature contactless, the networks will cling to signature
interchange as long as they possibly can, even to the extent of it
killing the value proposition of speed and convenience for emerging
products such as contactless cards.”
Move could spur on other
Although several major retailers
have also been vocal about the Visa signature restriction, none
have yet used contactless as a weapon to threaten the networks over
interchange, although Best Buy’s move could galvanise them into
taking similar measures – something which would not only put the
brakes on Visa’s contactless push, but would also open up another
merchant front against the payment networks over interchange.
Recent questions over the security of
contactless will not have helped to sway retailers into accepting
the technology. On 11 January, the Australian state of Queensland
launched an investigation into a security breach affecting its
contactless public transport ticketing system, operated by
TransLink, which involved the load amount of one person’s card
being incorrectly transferred to another person’s account of the
The state government has blamed the error on a
call centre operator failing to follow security protocols, with
transport minister Rachel Nolan saying: “The integrity of the
balance transfer system is critical and a breach of security
protocols like this is absolutely unacceptable. I have directed
that the breach be fully investigated by both the call centre
operator and by TransLink.”
However, the shadow transport minister, Fiona
Simpson, says the incident has raised concerns about the security
and integrity of the system.
But elsewhere, the contactless push continues
unabated. In the UK, telecom operator Orange and Barclaycard have
launched a co-branded contactless credit card on the MasterCard
platform, following a strategic partnership signed by the two
companies in March 2008 to promote the development and adoption of
contactless and mobile payment services.
The card also allows customers to manage their
budgets, put blocks on card spending online, abroad or for high
value transactions, and monitor their spending via automated SMS