Contactless Payments – Forgetting the Consumer?

The current media headline race by MasterCard, Visa, et al, would lead you to think contactless payments will answer all of their customer’s dreams, but as consumer-centric experts Vargo and Lusch tell us, “There is no value until an offer is used – experience and perception are essential to value determination. The company can only make a value proposition.” Other advocators of the consumer-centric approach to marketing, such as Chris Lietz, show us that the vital key to consumer acceptance of a new product (in this example, contactless payment) is the demonstration of how the product will truly benefit the consumer.

And here we have reached the major dichotomy in the cards and payment market, a market that has a strong reluctance to embrace new methodologies and change from a traditional view of product development. New programs are designed by payment schemes to please banks (and hence have a B2B driver), are developed by willing vendors, and yet they are finally delivered to consumers, which means that they need to meet their requirements to be successful – making cards and payments one of the few true B2B2C environments rather than just a reseller or middle-man setup.

Going back to our example of contactless payments, we have a real indication of what happens in this market when the ‘2C’ is forgotten. Contactless cards use the latest technology to create payment cards that don’t need to be inserted into a reader, simply performing the required data exchange through a short-range wireless connection established between the card and a special terminal. This means that a payment can be made by simply waving your card in front of the terminal – sometimes even whilst it is still in your bag or wallet.

Customer Interaction

At a corporate level, the business case for contactless is sound – merchants get a quicker throughput driven by slick payment technology, banks get to win more ground in the ‘war on cash’ by encroaching into low-value payments technology, and of course the payment schemes get to issue more cards with the consequent increase in revenues.

But what happens when you switch to the other side of the equation and make yourself consumer-centric? Imagine that you are now in a coffee shop getting ready to pay for your cappuccino. Traditionally you would have reached into your pocket and pulled out change, a bank note, or perhaps even a purse card while you waited in the queue and either paid the exact amount or waited a few seconds to receive your change. In the era of contactless payments, you can now just tap your wallet against the reader and payment is done. But what have you gained? Ten, maybe 15 seconds? What you have lost is physical interaction with the server, visibility of how much you are paying, control over the transaction. Payment has become so simple that as a consumer you feel no attachment to it. As one of the fundamental anchors of the trade (you give me goods, I give you payment) can merchants really afford to have consumers lose attachment to payment? If I don’t value my half of the trade, how can I value yours?

It’s true that contactless cards have a home in the world of payments. Indeed, low-value payments with an existing ticketing instrument, such as Oyster or Octopus,¹ are proving to be almost as popular as purse card schemes, but true mass-market adoption (measured by usage rather than card deployment) is highly unlikely due to the lack of benefit for the consumer. After all, paying someone quicker isn’t always in your interest.

It would seem that if the payment schemes really want to find the next big thing, they need to spend serious time and resources focussing on the real needs of consumers; how to curb the rising tide of fraud; and how to do things better (which isn’t necessarily faster). Only a fundamental shift in how they develop products will help them become a lot more consumer-centric, and perhaps they will be surprised to find that the next big thing is what they were least expecting it to be.