Contactless Payments: Delivering Merchant and Consumer Benefits

Publication Date: April 2004
Pages: 42

• Click here for the report table of contents.
• Contactless Payments: Delivering Merchant and Consumer Benefits [870k PDF - free download]

Executive Summary

Millions of U.S. consumers are already paying for purchases using contactless payment devices, with millions more expected this year as new financial industry-backed contactless payment initiatives are launched nationwide. Consumers love the convenience and speed of paying with a contactless card or fob-no more fumbling for cash, counting change, or worrying about whether they have enough cash for a purchase. In many cases, consumers also don’t need to sign a payment card receipt or enter a personal identification number (PIN). While paying with a payment card but through a contactless interface may appear to be a minor difference, the impact on today’s busy consumer is significant.

Both MasterCard International and American Express have been conducting contactless payment pilots in the United States and have reported strong consumer approval. These pilots use radio frequency (RF) communication between a contactless device and a point-of-sale (POS) terminal to transmit consumer payment information. The speed, convenience, and control of contactless payment transactions result in consumers favoring the contactless payment device and merchants accepting contactless transactions. Other contactless payment initiatives (for example, U.S. transit systems and ExxonMobil Speedpass) have reported similar positive consumer reactions.

Contactless payment is particularly attractive to retail segments where speed and convenience of payment are essential (for example, quick-service restaurants, gas stations, convenience stores, parking facilities, transit services, entertainment venues, and unstaffed vending locations).

Merchants realize a number of benefits from contactless payment:

• Fast transaction times move customers more quickly through the payment process.
• Increased customer spending, increased frequency of purchases, and increased customer loyalty increase revenues.
• Reduced cash handling, improved payment terminal reliability, and streamlined payment processes improve operational efficiency and reduce operating costs.

The new contactless payment initiatives in the United States also offer merchants opportunities to increase differentiation and customer satisfaction in highly competitive retail markets.

Merchants can implement a contactless payment solution quickly and easily and start accepting the contactless payment cards and fobs that are now being issued. American Express, MasterCard, and Visa have standardized on a single contactless payment standard in the United States, ISO/IEC 14443, and are implementing or recommending a contactless payment approach that leverages the existing payments infrastructure. What this means is that merchants can easily add a contactless RF payment terminal to their existing POS systems and start accepting contactless payment. The business case for certain retail segments shows significant increases in revenue with a modest investment.

Merchants who can benefit from faster transaction speeds and increased consumer convenience should assess the business case for upgrading POS systems for contactless payment. The combination of positive consumer experience, standards-based technology, potential to use the existing payments infrastructure, and support from major financial industry players offers compelling business drivers for contactless payment. In 2004, merchants can take advantage of the nationwide rollout of financial industry-backed contactless payment solutions to create a strategic competitive advantage and increase sales.

About This Report

This report was developed by the Smart Card Alliance to discuss merchant benefits and the business case for implementing contactless payment in the United States. This report provides answers to commonly asked questions about contactless payment, such as:

• What merchant segments can benefit most from contactless payment?
• What financial organizations in the United States are supporting contactless payment?
• What are the benefits and business case for adopting contactless payment?
• What does a merchant need to do to implement contactless payment at the point of sale?
• Are there issues for merchants to consider in a contactless payment implementation?

Developed with input from American Express, JCB, MasterCard International and Visa USA, this new Smart Card Alliance report describes both the qualitative and quantitative benefits of contactless payments for merchants and consumers in the United States. Included in the report is a sample merchant business case for a quick-service restaurant implementing contactless payment. The report also includes profiles of the American Express ExpressPay, MasterCard PayPass, Speedpass and Visa USA contactless payment initiatives.

Additional Information

Additional information about the American Express and MasterCard International contactless payment initiatives in the United States can be found at:

• American Express ExpressPay web site
• MasterCard PayPass web site

For additional information on the technologies used for contactless payment, see the Smart Card Alliance report, ”Contactless Payment at the Retail Point of Sale: Applications, Technologies and Transaction Models”