Contactless Payments Launches in the UK (finally)

Orange and Barclaycard have been promising contactless payments in phones for over a year. They finally launched the UK’s first NFC phone last week. It will first be available on a Samsung Tocco Lite on both pay as you go and monthly and the payment facility (called Quick Tap) can be set up by Barclaycard or Barclays Debit Card customers. NFC works much like an Oyster Card (for those of you who’ve travelled in London), whereby you top-up your account with up to £100, and can make single transactions up to £15. In essence it’s like cash, but without the pocket full of coins.  The contactless payments can be used at 50,000 stores, including Pret a Manger, EAT, Little Chef, Wembley Arena, Subway, Wilkinson and McDonalds.

Consumers often raise the issue of security with NFC. Could someone just brush past and deduct a payment? No, because the data is encrypted and can only be read at terminals. In fact, the NFC chips have been available on Barclaycards for some time, and there are no examples of that security being compromised. What if someone looses their phone, could someone just spend the money? Not really. If you lost it will all £100, once you tell Barclays the payment facility is cancelled and the money refunded. If you went out with £100 cash and lost it, you’ve lost £100. That doesn’t happen with contactless.

In spite of that, there are understandable consumer concerns about security, which is why users can add a pin number, making the contactless facility more like a traditional chip and pin. Will contactless catch on? Certainly Orange and Barclaycard have massive confidence in the scheme, and will be rolling out other handsets shortly (lets hope one of them is a decent smartphone). The potential of contactless as both a payment and marketing channel is there, however there is one big but. Consumer adoption. In spite of large investments in mobile NFC by banks, operators and handset manufacturers, there is little evidence that consumers are demanding contactless payments. Pushing technology to consumers does not a promise of success. The world of mobile is littered with failed technology (mobile TV, video calling, any Nokia phone in the last three years …). What is disappointing with the Orange/Barclaycard offer is that neither the handset nor many of the brands involved are exactly cutting edge (contactless in a Little Chef???). True, you have to start somewhere, but this isn’t going to reach the kind of social opinion formers who will evangelise about the technology. Maybe it will all happen with a contactless iPhone 5!

Proximity Marketing: Bluetooth vs NFC (Contactless)

The Problem with Bluetooth

Bluetooth: named after the scandinavian king who united the country, it hasn't managed to do the same for mobile

Just a few years ago, Bluetooth was predicted as being the next big thing in mobile marketing. The DMA even produced a set of Best Practice Guidelines. Bluetooth offered a number of advantages:

  • It was network independent – you didn’t need a mobile data connection
  • You could send large files, quickly to mobile handsets
  • It worked on even the most basic mobile phones
  • The units were relatively cheap to install

However, it has never reached its promised potential. There have been few examples of major brands successfully using Bluetooth, and none recently. The failure of Bluetooth seems to be down to a number of problems:

  • Users don’t understand how it works – most people have no idea how to turn on or off their Bluetooth. Those that do tend to keep it off as it uses a lot of battery power
  • It doesn’t work on a number of handsets including iPhone and BlackBerry. Given that these two models represent half of smartphone users that is discounting a lot of people
  • It isn’t very reliable – the units often fail to pick up handsets or cannot deliver content

When it comes down to it, Bluetooth was never intended as a marketing medium. It was intended to connect to other devices or for peer to peer file sharing. As such there has been little investment in the channel or the technology.

NFC, The Future of Mobile?

With rumours of contactless payments in iPhone5, 2011 may be the year of NFC

Near Field Communications, or Contactless is a contender for the next big thing in mobile. Unlike Bluetooth there has been a considerable investment in the technology by banks, mobile handset manufacturers and the mobile operators. Visa, for example has committed 400 million Euros to rolling out NFC this year. Payments and ticketing are the main driver, however the potential of NFC marketing is also a factor in its development. So far, only BlackBerry have announced a handset, but other manufacturers will follow. Rumour is that Apple will include it in the iPhone 5, assuming they can get the technology ready.

The key benefits of NFC are:

Simple to use – you just ‘touch in’ to make a payment, get your voucher or call back
The infrastructure already exists in the form of payment terminals in numerous retail outlets
Clear user permission – the action of touching in means that mobile handset users have specifically given their permission

So, it looks like NFC has a future (unlike Bluetooth). It is estimated that it will  be available in all handsets within the next 12 months. That just leaves one major hurdle, consumer adoption. Will mobile users trust it enough to actually use it?