In contact with the consumer

5 December 2011




Credit and debit cards capable of contactless payments for low-value transactions are becoming commonplace, and a growing number of retailers have the electronic readers to handle these transactions. Richard Armstrong of Barclaycard explains to Jim Banks how contactless payments are no longer driven by financial institutions, but by consumers and merchants.


The technology behind contactless payments is relatively simple. You need only a card and a reader equipped with near-field communication (NFC) capability, and with a quick swipe you can pay for goods costing up to £15 at many retailers. There is no need to insert the card into the reader or enter a PIN.

Research by card issuers such as Barclaycard suggests that paying for purchases with contactless technology takes half the time of a cash or debit card transaction. The convenience for both consumers and retailers, plus a concerted effort from financial institutions pushing the technology, has led to the rapidly growing use of contactless payments. The number of transactions in the UK has risen by 150% year-on-year, and there were more than 300,000 transactions in the past two months alone.

"Last year 28% of consumers recognised the symbol signifying contactless payment. This year, the figure is 44%."

"Among consumers we are seeing a growing awareness and understanding of the technology," says Richard Armstrong, new head of UK payment acceptance at Barclaycard. "We surveyed consumers last year and 28% said they recognised the symbol signifying contactless payment. This year, the figure is 44%. Between Barclays and Barclaycard there are 13.5 million contactless-enabled cards in the market.

"Contactless payment takes off when the consumer and retailer sides of the market move in tandem, and that is happening in the UK, which is leading the way in Europe. More and more retailers are signing up, including Co-op, Starbucks and McDonald's," he adds.

There are more than 60,000 contactless payment terminals across the UK, of which Barclaycard provided more than 83%. Furthermore, as big retailers sign up to use the technology there is a marked geographical spread across the country. "There are a lot of big brands using it now, and although it was a London-centric technology, it will spread across the whole country in 2012," remarks Armstrong.

NFC goes mobile

As well as the growing number of credit and debit cards capable of making contactless payments, there are increasing numbers of mobile phone handsets that are also equipped with the necessary NFC technology. In May, Barclaycard teamed up with mobile network operator Orange to launch the first NFC-enabled mobile payments system in the UK.

Known as Quick Tap, the system brings together the latest in mobile and payment technologies to allow customers to pay for low-value purchases by simply tapping a button on their phone. The basis of the idea is that customers usually carry their phone with them at all times, so they will not have to make as many trips to the cashpoint or, indeed, carry as much cash. Furthermore, the Barclaycard payment application helps customers to keep on top of their spending.

"The market must have the consumer and retail sides moving in tandem."

Users of the Quick Tap system can add money to their mobile phone from a Barclaycard, a Barclays debit card or an Orange credit card. When payments are made, cash is simply deducted from this balance. So far, the application is only available on the Samsung Tocco, but is soon to be rolled out across a wider range of handsets.

"In May we saw the full commercial launch of Quick Tap on the Samsung Tocco handset and there has been a lot of consumer interest," says Armstrong. "In the future, it will feature on a lot more handsets. NFC technology enables the shift of contactless payment to mobile phones, and we have addressed the concerns about security that have been raised. The key message is that contactless payment in any form has the same level of security as other payments we process, and there is a 100% guarantee of a refund if there is a fraudulent payment. So, consumers should not be concerned if their device or card is used fraudulently."

Experience convenience

Barclaycard is the first bank to be a board member of the NFC Forum - the trade and standards group for NFC technology - and so has firmly taken a lead role in pushing forward the development and acceptance of NFC systems. Furthermore, it is working closely with retailers to maximise the benefits of contactless payment technology, and is encouraging customers to try it out for themselves.

Armstrong believes that once customers have tried using their NFC-enabled cards or mobile devices to make payments they will not look back. The one caveat is that the experience must be positive, so the focus has been firmly on ensuring that the technology works well every time. The growth of contactless payment hinges on the extra convenience it brings to both consumers and retailers.

"The market must have the consumer and retail sides moving in tandem. We will see more and more merchants signing up in 2012," says Armstrong. "Every terminal we provide to our small business customers is already capable of accepting contactless payments, so the transition among smaller merchants will be seamless. More mobile handsets will have contactless capability, too, so it is clear that the technology has gone past the tipping point," he says.

"It is no longer something that is being pushed out by the payments industry, it is something retailers want. We know this because they are asking us for it. Consumers will look for it more and more. Once people experience it, they really appreciate it."

You need only a card and a reader equipped with near-field communication (NFC) capability, and with a quick swipe you can pay for goods costing up to £15.
Richard Armstrong is head of UK payment acceptance at Barclaycard.