Contactless is the future of payments

Contactless card offers little tangible advantage as far as consumers are concerned, compared to "chip-n-PIN" transactions.

Contactless payments via mobile represent a better use case, IF (I cannot make that IF any bigger here) (a) real-life penetration and (!!) active use of NFC phones reach meaningful scale and (b) the schemes allow for PIN entry on the phone  (or all the UK issues will switch to online PIN).

None of that is going to happen any time soon...

Until then, "chip-n-PIN" and good old cash will do the job just as fine (as has been the case for decades). NFC is trying to solve the problem that doesn't exist, as far as mainstream payments are concerned.

I wouldn't rush to rule out technology as the cause of double-dipping at Marks & Spencer. I've experienced this at two feet: 

The Clear And Present Danger With NFC Payments

While I was a very early adopter of contactless cards, I've started having second thoughts about its security after incidents like these. Besides, if I've to take out a contactless card from my wallet to prevent such incidents, half the convenience of contactless is lost anyway. 

Of course there will be early adopter blips, this ain't no trivial feat.  The blips are more or less inevitable because the processes are quite complex and they absolutely must work properly.  It's not about convenience or ease of understanding or any other marketing chat, it's about knowing that if I pay £4.65, that is what gets debited.  If the blips become mainstream, the facility won't be used, simple as that.  This is because the ability to transfer value is the stitching that holds together the fabric of society - this point is not a technical point but it is a point that can not be emphasised enough.  If we loose track of this fundamental principle, we won't be going anywhere and cash will once again be king.

So ...

contactless cards are a means of extending the reach of contactless payments, sidestepping the usual chicken and egg problem by providing a means for the card-carrying public to use the facilities embedded in contactless terminals.  Terminal numbers and card numbers increase along a similar path.  

And ...

contactless cards are a stepping stone to mobile contactless payments.  The differential between contact and contactless is generally insignificant, however that's not the case between contact and mobile - completely different user experience.  

The problem is that it was expected that the mobile service providers would be delivering universal mobile payment facilities by now, and they are not.  

That doesn't mean that the future of payments isn't mobile.  It just means that no one has yet grasped the true complexity of the task.

Seriously.. "magnets to communicate data"... is this for real? 

And as for the future of payments. Well, Contacless and NFC may be a passing phase but not the future. The future of payments has not even been described yet. When Magstripe was introduced, that was the future of payments.. and yet we are desperate to kill it off.

Ah.. but then you say they will play a key role. So they are not "the" future of payments, just a bit player in an ever changing payments landscape that with remarks soch as "magnets to communicate data" will just confuse the users. 

And why are you repeating the claim that M&S charged twice? They didn't. It's impossible to have had it happen. Yes, your explaination may be correct but THEY DID NOT GET CHARGED TWICE as you imply. 

I have to add.. this is a really badly written article and I'm almost ashamed to be associated with the writer. 

I think on this one it's a bit like a court case. You can find articles to support the fact that contactless is growing in importance...

https://www.finextra.com/news/fullstory.aspx?newsitemid=24924

... and articles to support the fact that the "boom" in contactless may not be as big as some people think...

https://www.finextra.com/news/fullstory.aspx?newsitemid=24884

I know there's a sense that in the future we will live in a "connected world" with intelligent televisions, fridges and everything else. Who knows? The future is hard to predict - though we may still play the lottery now and again.

I do agree, however, with the fact that the technology needs to be solving a problem. If we're talking about long queues at Starbucks - the issue is not how fast it takes to make the payment, but how fast they can make an expresso.

Spot on, Eric - the speed bottleneck is not in payments, when it comes to retail. -- As Steve Jobs said, the best way to predict the future is to invent it!

@EricS: Spot on +1. In all this hype about technology, many of us - including me - tend to forget what really matters. According to my calculations, 24 out of 25 Starbucks customers don't use its mobile wallet for making payments. Surely, Starbucks still can't make espressos fast enough?!

Sorry, fixed the above hyperlink. It's ow.ly/lNKVk

I really can't believe we are still debating this.  Consult Hyperion lab tested the scenario to see if the "M&S" incident was possible (according to the published newspaper reports) - their tests showed that it wasn't.

With regards to the dangers of "passively" capturing card data and using it - it is at the Issuers discretion as to whether or not they decide to use a secondary PAN for Contactless transactions - even if they don't - and hypothetically the card data is electronically skimmed - the CVV data contained on the Contactless Magstripe Equivalent Data would not be usable (for non-contactless transactions) and any attempt to use the data via any other channel would be identified on the issuers card management system.

Back to the "M&S" Scenario - what is likely to have happened is that a consumer has moved their purse/wallet in close proximity to the Contactless Terminal in attempting to find the card they want to use and the EFT-POS Terminal has accepted a transaction on a Contactless Card that happened to be co-habiting the same wallet.  I know exactly which EFT-POS Supplier is concerned - and their software has similar issues at other sites with regards to other functionality during the completion stage of a transaction (ever noticed how your "Clubcard" scans without selecting it?).  Had it been written correctly - it should wait for the User to select "Contactless" as a method of payment before powering up the radio unit to look for a card/mobile.

Wonder if the Chatham House Rule is slowly taking root in Finextra :) Anyway, the debate has shifted to the cost-benefit / risk-return proposition of mobile / NFC / contactless payments. To return to the M&S scenario, I doubt if it matters to a man on the street whether the POS software is correctly written or not - in the opinion of an anonymous Finextra member or anyone else. IMHO, what counts is that a reputed company like M&S has certified the POS for use at its store. When such a POS could potentially cause a problem - of exactly the nature I'd described in my comment here - switching to another retailer is overreacting. Turning wary of contactless is sensible.

Contactless / NFC is undeniably more efficient way to pay @ POS for consumers than contact payments.

But the fact is that globally only at 2-3% of the POS locations contactless / NFC is actually available, regardless how many consumer cards / mobile phones are enabled for it. Hardly 'successfull' as some may want to present it.

Why? It seems obvious that just changing the form factor of payments, without fundamentally addressing the transaction economics (especially for low value transactions which are in fact being the main target of contactless payments) isn't enough to attract merchants into embracing it.

@MilosD: I know merchants always want to have their cake and eat it too. But, even by their standards, contactless delivers tremendous value since it pays the merchant twice per transaction via "double-dipping". Okay, just joking. Since you've raised this very valid point, just wanted to check if you have come across any reports on business case for contactless, especially for merchants.

I agree with the prior statements that this is a new technology and all technology has it teething problems.  What I dont get is why consumers even think of touching the whole wallet on the reader - in the world before contactless, did you give your wallet to the shop assistant and ask him to pick out the card they fancied, or did you pull out your card and paid with it?!  It wouldnt even occur to me to give it to chance and touch the wallet...  If you know your cards are contactless you should appreciate that they can communicate with the reader!  I feel that the issue is cardholder and shop assistant education. As Neil mentions, chip and pin took a while to get across, so the same will be for contactless. It is convenient, no question about it, but some of us may experience more need for it - if you live in a big city, walk around, in and out of cafes, buses, newsagents.  As with all things in life, not many things are right or everybody!

When you're carrying your laptop bag in one hand and a heavy shopping bag in another, there's major convenience in making a payment by sidling past the contactless reader without having to take your wallet out of your pocket, let alone a particular card from out of the wallet. But, let's ignore that scenario for a moment. Even assuming that I take out my desired contactless card and hand it over to the attendant, there's every possibility that my wallet containing another contactless card is within the threshold distance of the contactless reader, thereby triggering double-dipping. A comparison with Chip and PIN is not really valid. That was part of EMV regime, which was a regulatory change that gave little choice to the payer or the shopkeeper, whether they understood the new form factor or not. There's no similar compelling reason for adoption of contactless. 

Wow.. why would I ever "Even assuming that I take out my desired contactless card and hand it over to the attendant". I don't even do that on a chip and pin payment if I can avoid it.

Not sure that Ketharaman has ever actually used a contacless payment card when he seems to imply that I can just "slide" past the contactless reader. I would have to be in a very awkward position whether it was in my trouser pocket or jacket pocket for this piece of technical wizadry to happen. And the fact I have several contactless cards - Debit,  2xCredit, Oyster, NFC Business Card in my wallet, the payment would just.. fail. 

And slightly sexist - "When you're carrying your laptop bag in one hand and a heavy shopping bag in another". Pretty sure this was never a use case thought of by the issuers. 

If I have to dip into my wallet and fish one card out, why not do chip&PIN?.. Time-wise - not a big difference; security-wise - a different story.

@RaymondL can rest assured that I've used a contactless card exactly as described - and I've linked to more details of the circumstances thereof in one of my previous comments - and I can show a demo of that even now. But, I didn't have any more contactless cards in my wallet at the same, so I agree that this mode of use is not scaleable. If there are multiple contactless cards in the wallet, I recognize that this mode of usage will either fail or work too well for my good by causing double-dipping. I've said before that half the convenience of a contactless card is lost if you must take it out of your wallet, so I agree with @AlexanderP's comment. It's not such a big difference whether you hand over the contactless card to the attendant or tap it yourselves - double-dipping is a clear and present danger if the wallet containing other contactless cards is in the vicinity of the contactless reader. My use case of laptop plus shopping bag is hardly rare. If issuers ignore such a common use case, it's no surprise that they're facing such an uphill task pumping up contactless card adoption some 5+ years after launching it.

Again.. why would you hand over your card to even do a chip and pin transaction??? If someone has to touch my card, I will often just walk away from the purchase. I don't want anyone to touch my card. 

And double dipping.. are you implying that something will be paid for twice? 

I'm not the only one who finds that "Handing over a card is normal behavior". 

http://blogs.reuters.com/felix-salmon/2013/07/03/why-mobile-payments-will-never-take-off/

"If someone has to touch my card, I will often just walk away from the purchase." Not sure if merchants and issuers thought of this use case.