POS ARTICLES

Contactless Payment Terminals

As technological advances continue to alter the way we communicate with one another, the age-old exchange between consumer and merchant at the point of sale (i.e. cash register) will soon be rendered obsolete by the advent of contactless payment. This technology is currently being utilized to speed up the payment process so that consumers can pay for purchases without having to swipe a payment card through a reader, hand the card to a merchant, or simply fumble for correct change, effectively eliminating the physical contact between the consumer's payment device and the physical point-of-sale (POS) terminal.

 

In a payment ecosystem already streamlined by credit and debit cards, gift cards, etc., contactless payment is being lauded as a way to further expedite the payment process. Since the requisite signature will no longer be necessary in most cases for purchases under $25, research indicates that consumers are more likely to spend more due to the ease of small transactions. Although there are thought to be over 40 million contactless payment devices in use in the U.S., apprehensions regarding identity theft and other fraudulent manipulations of this technology have stymied their growth. (www.wikipedia.org/wiki/Contactless_payment)

 

However, these concerns have been allayed by the huge potential contactless payment technologies stand to offer both the merchant and the consumer. American Express, Discover, MasterCard, and Visa have all introduced contactless payment methods so far, with other major corporations following suit. These products rely on a technology that ensures payment solution compatibility regardless of brand or payment device when used with contactless readers that have been approved by the payment brands.

 

One significant advantage is their simplicity. These devices, which usually come in the form of the convenient "smartcard" that can be handheld or fit into a key fob, include a small microcontroller, memory, and an interface - in this case, a small embedded antennae- that connects to a reading device positioned at the POS. The device can then communicate with a device reader using radio frequencies that require no physical contact between the device and reader. The ease afforded by contactless payments, given that the consumer simply has to place the device in close proximity to the reader to complete the transaction, allows for a "better customer experience," according to a recent survey. Contactless smart card technology is currently used in a wide variety of applications, from traditional credit and debit card payment to electronic passports.

 

Another advantage is related to the speed and convenience of contactless payment technology. Studies show that they reduce customer time at the POS by 30-40%, and that contactless transactions are 64% faster than cash transactions and 53% faster than traditional credit card transactions. Most importantly, shaving valuable seconds off purchase times ultimately results in higher sales volumes and customer spending; recent research suggests a 20-30% more increase in spending results when consumers can employ contactless payment devices rather than using cash.

 

Besides the advantage of increased earnings, merchants are also able to reduce operation costs by accepting contactless payments. The use of these devices results in fewer cash handling requirments, improved operational efficiency, and reduced maintenance costs. By offering contactless payment options, merchants are able to maintain relevancy by offering the latest in technological advances, as well as enabling them to offer closed-loop products, such as gift cards, which promote brand awareness and strengthen customer loyalties in an ever-competitive market. Innovative contactless payment products, the result of merchant/issuer collaborations, invite the opportunity to target varying customer segments with particular provisions regarding the shopping experience.

 

Regarding the issue of security, the financial payment networks used to process contactless payment are the same used to securely process millions of magnetic stripe transactions securely every day. However, the industry has added an additional layer of security to these devices by using RFI (radio frequency identification) technology to send payment account information to the merchant's POS terminal, rather than requiring the payment card's magnetic stripe to be physically read, as in traditional credit or debit card transactions. Contactless payment devices are also designed to operate at a range of less than 2-4 inches with the POS, and can include additional security enhancements as well. Liability protection programs offered by the various payment brands and their issuing banks that detect possible fraud also provide the consumer with further protection.

 

As with any other change to the retail environment, the implementation of contactless payment technologies requires extensive planning. Besides employing a project manager and a multi-purpose team with the knowledge and skill sets required for the successfull installation of contactless payment readers, it is essential to work with certified processors and acquirers who understand contactless payment systems and can assist in implementing a solid solution. It is also crucial to consult with card payment companies, issuers, equipment vendors, and other industry resources that are conversant in this type of   technology. For more information on the necessary requirements associated with implementing contactless payments, click on  (www.smartcardalliance.org/download/pdf/Merchant_Implementation_Guide_WP_20070822.pdf)