Barclaycard is attempting to kick-start the move to contactless payments with a miniature credit card it hopes customers will stick on the back of their mobile phones.
The credit card company has unveiled its PayTag, a sticky contactless card that can be used to make payments of up to £15 ($24) - rising to £20 in June - by being held over a contactless payment terminal, without using a PIN.
A limited set of Barclaycard customers will be offered the tags in the next few weeks, before the scheme is opened up to most of its 12 million customers later this year.
Contactless payments technology has existed for some time – there are already over 14 million contactless Barclaycards and Barclays debit cards in circulation. But take-up by shoppers has been limited, and it has taken the banks, retailers, mobile operators and handset manufacturers a long time to agree on how the technology should work in mobile phones.
As a result, few smartphones come with the near-field communications (NFC) technology for contactless payments, and so Barclaycard will be hoping its PayTag will encourage consumers to think of their phones as mobile wallets.
David Chan, CEO of Barclaycard Consumer Europe, said: “We’re giving people the option of using them to make easy, convenient, everyday payments without the need to upgrade their current handset.”
The infrastructure for contactless payments is now being rolled out more widely in the UK. There are about 100,000 point-of-sale terminals that accept contactless payments. By the end of 2012 that figure is expected to rise to 150,000 and will include terminals at chains such as Waitrose, McDonald’s, Boots and Tesco. By the end of 2012, London buses will also accept contactless payments, followed by the Tube and the rest of the capital’s transport network in 2013.
Barclaycard predicts that as much as £3bn ($4.8bn) worth of purchases will be made with mobile phones in the UK in 2016.
Rene Batsford, head of IT at sandwich chain EAT, said contactless payments have gone from zero to 15 per cent of all electronic transactions across its 120 stores in three years – some 50,000 transactions a month.
Batsford said contactless payments have significant benefits for retailers: “If you can take cash out of the system, you can reduce fraud and operational costs. Contactless is faster than cash or chip and PIN.”
Of that total, the number of transactions from mobile phones with contactless payment technology is small. “But it’s going to grow,” he said. EAT is also testing a contactless reward scheme, called Quick Tap Treats. Customers with NFC-enabled handsets can tap their device on a special poster to receive a free treat – such as baguette or a coffee.
Batsford said about 200 treats had been redeemed in the first few weeks: “It’s all about getting new people in, new footfall, particularly people who are tech-savvy.”
He said implementing the infrastructure for contactless payments will also allow the chain to add additional services. For example, in the future customers could order their food using their phone and have it ready to pick up when they arrive, using contactless self-service. “The most innovative sector is retail because we are making the technology go much further to improve the customer experience,” Batsford said.
David Snow, senior mobile commerce analyst at Juniper Research, said NFC actually solves several problems for the user, the financial institution and the retailer. He said it is likely to become “a very popular technology”.
He said we are now seeing a dramatic increase number of handsets launched with NFC during 2011 and 2012. “In the UK there is growing momentum in the opportunity presented by the Olympics. It’s high-profile demonstrations like this that help raise the profile and possibilities of NFC payments and move the market on.”