Electronic Payment Technology Evolves Fast for Consumers

While operators continue to struggle with the implementation of cashless payments to vending machines, many other industries have transitioned past the threshold of non-cash settlement and begun accepting contactless cashless payment media. Contactless technology allows the consumer to simply wave, or tap, a payment device in front of a contactless reader to complete a transaction.

Trials of proximity payment technology revealed that contactless payment technology produces higher transaction throughput, increased spend per transaction, and enhanced customer convenience. While the preferred contactless technology has been radio frequency identification (RFID), the newest trend favors near field communication (NFC) technology.

Unlike RFID, which requires a unique infrastructure to work, NFC is a more intuitive application that provides an open basis for connectivity and networking.
In addition, NFC can be housed in a mobile phone and offers built-in security, enabling it to be used for transaction settlement as well as data exchange. As attention shifts away from RFID to NFC convenience, the potential impact on the vending industry could be significant.

M-COMMERCE EVOLVES

Are consumers interested in using an NFC-enabled mobile phone for making purchases? A recent online survey conducted by Visa found that 61 percent of respondents between the ages of 25 and 34 responded favorably to making purchases using a mobile phone. Similarly, the survey found 64 percent of the respondents are interested in receiving coupons via a mobile device. In addition, more than half of the consumers surveyed admitted carrying a mobile phone at least 75 percent of the time.

The demand for NFC technology is being heavily driven by the emergence of contactless payment formats being packaged into mobile devices (m-commerce). The development and deployment of innovative chipsets for cellular phones is projected by ABI Research to lead to widespread adoption of NFC contactless payments over the next five years.

CONTACTLESS TECHNOLOGIES EXPAND

Up until recently, contactless payments were limited to card-based payment interface involving a sophisticated card reader. Rather than inserting a payment card into a point-of-sale (POS) device, or swiping the card through a magnetic stripe reader, the contactless device merely required the card to be in proximity of the reader to capture data stored on an embedded RFID chip.

Waving a card within a few inches of a contactless reader was sufficient to complete the data exchange. Once the RFID data was captured, the reader had to be interfaced to a payment mechanism for the transaction to progress toward settlement.

With NFC technology, the housing device (mobile phone) acts as an electronic wallet (e-wallet) and is responsible for completing the settlement function.

RETAILERS EMBRACE CONTACTLESS PAYMENT

Contactless payment adoption at retailer stores is gaining momentum as reported by research firm Aberdeen. The company claims that nearly one-third of all retailers have either implemented or are planning to implement some form of contactless payment technology in 2008.

Initially, the movement toward contactless technologies experienced resistance from business operators based on the high cost of implementing new equipment and the corresponding infrastructure necessary to complete the exchange of financial data.

With the evolution of strategic partnerships between NFC providers, payment processors, and POS vendors, retailers now have the opportunity to implement cost-effective hardware, software, and netware without necessitating structural changes. In addition, there is also a solid base for ancillary and future applications.

Typically, contactless payments significantly reduce waiting times for customers by removing the hassle associated with cash payments or the processing of swiped electronic payment cards. Such benefits may well apply to consumers using vending equipment.