Adoption of contactless payment for retail and transit confirmed

Growth and excitement continues to surround the contactless financial and transit payment markets, industry leaders confirmed at the Smart Card Alliance's first annual Payments Councils Summit held recently in Salt Lake City, Utah.
35m contactless financial payment cards (branded with MasterCard PayPass, Visa payWave or American Express ExpressPay) have been issued in the US, with more than 400,000 readers in place at 80,000 merchant locations, according to Mohammad Khan, president and founder of ViVOtech, in a presentation to meeting attendees.

Merchants like McDonalds, CVS/pharmacy, 7-Eleven and Jack in the Box continue to accept contactless payments, and more merchants are coming on board. New acceptance locations are popping up, too, in spots like taxis, parking meters, vending machines and sports stadiums. With the contactless payment acceptance infrastructure in place, industry experts also forecasted that the transition from payment cards and key fob devices to Near Field Communication (NFC) m-payments will be straightforward.

New company research presented by Wendy Humphrey, First Data's vice president of enterprise payments, asked merchants to cite the benefits of accepting contactless payments. 51% of merchants said faster checkout and increased throughput at the point-of-sale (POS), 46% said the ability to support customer preference for the contactless payment option, and 25% said being ready for future payment solutions (like NFC).

According to Didier Serra, general manager of the Americas for INSIDE Contactless, contactless payment momentum is not expected to slow; with issuance growing to 50 to 60m cards in 2008, he forecasts.

Chase, a leading issuer of contactless financial payment cards, reported good news regarding consumer use and loyalty. Mike Kutsch, vice president of card services for Chase, said the company continues to see “a positive impact on lift, shift and spend.”

Convergence of transit and financial payment markets was also a key theme throughout the meeting, stimulated by updates on pilots by MTA New York City Transit (NYCT) and the Utah Transit Authority (UTA) where contactless financial payment cards are being accepted directly for fares.

NYCT average fares on subway lines involved in the pilot were up 17%, while revenues were up 8 to 13%, Steve Frazzini, chief officer of AFC program management says, describing it as a “wow factor” in the first phase of the pilot, which allows riders to use their MasterCard PayPass card to directly pay for subway rides in New York City. “The convenience factor may play an important role,” he says.

Frazzini also announced that NYCT is now moving to the second phase of the pilot, where support will be added for buses, and for all contactless financial payment brands and form factors.
In Salt Lake City, the host city for this annual Alliance meeting, the UTA has completed a successful pilot and is moving to full deployment of contactless fare payment, project manager Craig Roberts announced. He said that UTA will expand acceptance of all major brands of contactless financial payment cards to regular buses, ski service buses, the TRAX light rail line and the commuter rail line.

Transit-specific contactless fare payment programs also continue to gain momentum in the US, with active transit fare payment programs in Washington, D.C.; Baltimore; San Francisco; Oakland; Los Angeles; Chicago; San Diego; Seattle; Minneapolis; Houston; Boston and Atlanta. Representatives from two new major transit fare payments projects, Philadelphia (SEPTA) and Greater Toronto Area (Metrolinx), joined the Council to participate in the discussions on contactless deployment with other operators and suppliers.

Summit sessions also explored new models for transit payment-using co-branded multi-application contactless smart cards for transit and financial payment, and looking at how transit can serve the unbanked or underbanked consumer with prepaid financial cards.

“The Alliance is proud to be able to host an open forum for industry stakeholders to come together and share their experiences and knowledge of the markets for contactless smart card technology,” says Randy Vanderhoof, executive director of the Smart Card Alliance. “This kind of meeting brings out a cross section of points of view that lead to expanded awareness and new ideas that benefit all involved.”