Sudden Allure - Digital Transactions

THE GIMLET EYEGetting in Touchwith ContactlessContactless payments took another hit last fall when Best Buy Co. Inc.turned off acceptance of Visa Inc.’s payWave contactless program at its1,000-plus U.S. stores. Since there were few transactions to speak of anyway, the move was largely symbolic. The big electronics chain was sending a bluntmessage to Visa that it was unhappy with the card network’s refusal to support PINtransactions on its contactless system.PIN debit is less costly to merchants than signature debit, so it’s not hard tounderstand Best Buy’s position. If contactless ever takes off, and ultimately supportsmobile payments, the retailer stands to save potentially millions of dollarsin transaction costs if can accept payWave with PINs. But Visa said no, and soBest Buy pulled the plug, though news of the shut-off didn’t emerge until lastmonth. The chain is still accepting MasterCard Inc. contactless transactions, sinceMasterCard permits PINs in its PayPass program.Now, it’s easy to get wrapped up in some of the questions this news raises.Wouldn’t entering PINs defeat the purpose of contactless technology, which purportsto speed up transactions? Why would Best Buy want to install contactless inthe first place, since the technology is aimed at high-throughput, low-ticket venueswhere transaction speed is of the essence?We don’t know the answers to these questions, since Best Buy isn’t talking. Butno matter. The real issue this little drama illustrates is that contactless has been adead letter with many merchants for some time, and it’s likely to remain so. Yes, tensof thousands of locations now accept the wave-and-pay cards. But those cards alsocome with mag stripes, and a swipe with no signature—permitted now on a greatmany low-value tickets—isn’t any slower than a wave. At the same time, many consumerscarrying the cards aren’t even aware they have contactless capability.Merchants look at that picture and wonder where the case is for contactless.What’s needed to spark contactless deployment, as we’ve argued before, is aninterchange incentive, similar to the one the networks used to jump-start electronicdraft capture back in the 1980s. Indeed, this move would make more sensethan the hardware subsidies the networks have used to entice merchants to installcontactless—and from which they’re starting to back off.Best Buy’s action underscores how crucial the interchange question is. So far,the networks have resisted any idea of an incentive rate, eager as they are to protectissuers’ incomes. But without such an incentive, contactless will continue to drift.Too bad for contactless, but too bad also for mobile payments at the point of sale.John Stewart, Editor-in-Chiefjohn@digitaltransactions.netPUBLISHERRobert A. JenischEDITOR-IN-CHIEFJohn StewartSenior EditorJim DalyCorrespondentsJane AdlerLauri GiesenKaren Epper HoffmanPeter LucasLinda PunchArt Director/Production EditorJason SmithEditorial Advisory BoardEula L. AdamsJohn ElliottAlex W. “Pete” HartFormer Chief Executive Officer,MasterCard InternationalWilliam F. KeenanPresident, De Novo Corp.Dr. Gideon SamidChief Technology Officer,AGS Encryptions Ltd.Director of AdvertisingRobert A. Jenisch, 877-658-0418bob@digitaltransactions.netAdvertising Sales RepresentativesRobert Mitchell, 877-658-0418bmitchell@digitaltransactions.netCathy Woods, 602-863-2212cathy.woods@mediawestintl.comDigital Transactions, Digital Transactions News,and digitaltransactions.net are publications ofBoland Hill Media LLC, 3 Golf Center, Ste. 314,Hoffman Estates, IL 60169John Stewart, Managing DirectorRobert A. Jenisch, Managing DirectorFor advertising information, call 877-658-0418.To subscribe, go to www.digitaltransactions.netand click on “Subscribe” or call 847-559-7599.To give us a change of address, call 847-559-7599.The views expressed in this publication are notnecessarily those of the editors or of the membersof the Editorial Advisory Board. The publishermakes reasonable efforts to ensure the timelinessand accuracy of its content, but is not engaged inany way in offering professional services relatedto financial, legal, accounting, tax, or other matters.Readers should seek professional counsel regardingsuch matters. All content herein is copyright© 2010 Boland Hill Media LLC. No partmay be reproduced without the express writtenpermission of the publisher. Subscription prices:$59/year for subscribers in the United States;$69/year for Canadian subscribers. All other subscribers,$119/year, payable in U.S. currency.4 digitalFebruary 2010