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August 3, 2010

Are we at the contactless tipping point?

Barclaycards agreement with Co-op Pharmacy, a division of The Co-ops supermarket estate in the UK, to offer contactless payment acceptance could pave the way for a boom in contactless payments

By Verdict Staff

Barclaycard’s agreement with Co-op Pharmacy, a division of The Co-op’s supermarket estate in the UK, to offer contactless payment acceptance could pave the way for a boom in contactless payments. John Hill reports on the deal and Barclaycard’s plan with Orange to roll out NFC mobile phones in 2011.

 

Stuart Neal, BarclaycardThe UK’s Co-operative Pharmacy is to trial contactless payment in its branches after joining forces with Barclaycard. The trial will incorporate all contactless bank cards and will begin in approximately 50 Co-operative Pharmacy branches early next year after an agreement was signed with Barclaycard, in partnership with Visa.

If successful, the Co-operative Pharmacy said it intends to roll out the technology to more than 500 branches by March 2011 before implementing it across the brand. The project is part of a wider Co-operative Group initiative, which will see the business become the UK’s first major food retailer to introduce contactless payment if initial tests are successful.

Roll-out of contactless payment in the UK began in 2007 and there are now over 9m contactless-enabled cards in circulation. Stuart Neal, head of UK payment acceptance at Barclaycard said the deal is an important step forward towards the wider usage of contactless in the marketplace.

“The deal is really a publicly stated intention on both sides that Co-op are going to initially pilot, but then roll out contactless across their estate,” he said.

“It will start with 100 stores and then look to deploy across their business. What’s really exciting about this from our point of view is that we’ve been working with a number of top tier supermarkets for a while because we see mass market adoption of contactless and supermarket rollout as going hand in hand.”

 

Quote from Stuart Neal, BarclaycardCritical mass

With a large retailer like Co-op now looking to implement the technology across its properties, there is a question over whether contactless has reached tipping point, after which many of the other high street brands will start following suit. Neal said it may be too soon to tell, but believes interest in the payment system is increasing.

“Our customers are very broad ranging, so we have 90,000 SME customers and between 2,000-3,000 corporate customers. Certainly at the larger end of the book, the publicly listed companies, they are all interested and excited about contactless,” he added.

“So we are talking to a lot of top tier retailers but we are not in position to go public with those conversations. What I will say is that there is a lot of interest and we are hearing that people would like to combine a contactless rollout with their usual cycle of replenishment of their electronic point-of-sale systems.”

“We are in the middle of a natural re-issuance cycles, so by the end of 2012 all of our debit card portfolio should have been replenished. That means the Connect debit cards, for example, will be contactless-enabled as well as the standard consumer credit cards.”

 

Positive signs

Previous successes with chains like Prêt a Manger and Subway have given contactless a real case among larger high street stores, though success with smaller entities could be key to enabling this migration. They are the businesses most likely to be hit hardest by card fees on lower value payments, and the least able to make investments in technology.

Another element is persuading the public themselves to use the technology, potentially replacing other methods of payments like cash. Neal dismissed a recent statement from research organisation Datamonitor which claimed the technology was mainly hype.

“We feel very strongly about contactless; we see the adoption rates, we’re the ones having the conversations with the retailers and I think what you’ve seen with the Co-op deal is our way of saying back to the market ‘We are having these conversations and supermarkets are very interested in having the capability to use contactless,” he said.

“The Co-op happens to be the first supermarket that are formally announcing they are going to rollout, and we’ve put out 8m cards into the marketplace; we believe that strongly about it. We are getting a very positive response from the merchant community about acceptance.”

 

M-payments relates to contactless

Similar to contactless, there has been a lot of discussion recently and a lot of hype behind mobile payments. Neal explained how Barclaycard is looking to use the technologies together in the next few years:

“We’re certainly looking at m-payment as it relates to contactless. What contactless does is really enable mobile payments as a possibility and bringing mobile payments into the face-to-face, over-the-counter world,” he said.

Neal said Barclaycard was trialling a mobile contactless product with Orange and is looking to roll out the phones at some point in 2011, with a view to further adoption by 2012.

 

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