U.S. Merchants in Need of Education on Contactless Payments

by Mercator Advisory Group 0

In early June, I took a taxi to meet somefriends for dinner in Boston. As the driver pulled up to therestaurant, the screen in the back of the cab displayed the ride’stotal cost, along with the question “Cash or Credit/Debit.” Iselected credit, took out my card, and held it against thecontactless reader currently installed in most Boston taxis. Thedriver turned around, saw this, and exclaimed “Hey! Hey buddy! Themachine doesn’t work like that! Just swipe your card down theside!”

As he finished speaking, the receipt began to print, a clearindication that the transaction had been completed. A confusedexpression came over his face, so I explained to him that, yes, hisPOS terminal did in fact have the ability to readcontactless-enabled cards, and that he could expect to see morepeople paying with contactless technology in the next few years. Heturned back around and said, “Oh, I figured you were just drunkalready…”

This story illustrates the fact that despite all of the attempts tocreate excitement among consumers for mobile payments, merchantsare relatively ignorant about both mobile payments and theircontactless antecedent. Although I’m not always accused of beingintoxicated when paying with my contactless credit card or the RFIDtag on the back of my phone, most merchants who see me paying withcontactless technology are surprised to find out that theirterminals possess that capability.

Compare this to my experience purchasing a few items in aconvenient store outside the recent ACT Canada Cardware conference.When I swiped my card through the magstripe reader, nothinghappened. The merchant took my card, noticed the”contactless-enabled” emblem, and held the card to the contactlessreader. The transaction completed, and he said, “Card worked justfine with the contactless reader. I’m not sure what’s wrong withthe magstripe.” Not only did this merchant realize his terminal hadcontactless capabilities, but he was able to recognize immediatelythat my card was contactless enabled. This seemed to be the casewith most of the Canadian merchants with whom I interacted.

At ACT Canada’s conference itself, the focus was placed squarely onmobile payments, with topics discussed including “The Future ofMobile Wallets,” “Security and Privacy in a Mobile World,” and”Fraud in the Mobile Market.” Between my experiences at thisconference, and MasterCard recently ranking Canada as second onlyto Singapore in terms of mobile payments readiness, there is littledoubt that merchants in Canada are significantly more prepared formobile payments than those in the U.S.

If the U.S. is going to adopt contactless payments in the nearfuture, the merchants with contactless capability need to beeducated regarding that feature of their terminals. If they don’tknow that contactless payments even exist, then they certainlydon’t know about any potential benefits it could have for theirbusiness once mobile NFC payments arive, and therefore have littleincentive to either upgrade their terminals or encourage customersto use the contactless reader. No matter how excited technophileconsumers may get over the potential to replace their wallets withtheir phones, it won’t mean a thing if merchants aren’t interestedin accepting mobile payments. And the first step in convincingmerchants to adopt contactless technology is teaching them that ifa customer is tapping their card against the POS terminal, he isn’tjust drunk and confused. Well, at least not necessarily.