The way consumers pay for goods may be turning a corner. Although people remain nervous about using contactless cards, usage in the UK has increased by four percentage points to 12 per cent in the past four months, according to a study by ICM Research.
The study, which was first conducted in November 2012 and repeated last month, finds that of those who have made contactless payments, 9 per cent say they make them every day, compared with 5 per cent last November, while 28 per cent make them most days, up from 12 per cent in November. Nearly half of those who use the technology say they would be more likely to shop in places that offered contactless payment.
Jamie Belnikoff, associate director at ICM Research, believes that although the percentage uptake is heartening for brands, it has not reached its tipping point. This will only happen when consumers are suitably encouraged and reassured.
Consumers highlight security concerns as a major obstacle stopping them using contactless payments. Women are more security conscious, while men are more practical in their attitudes to the technology. Belnikoff says: “Women are more likely to say they would use contactless more often if their security concerns were allayed. There is an opportunity to communicate to them how secure it is.”
Different ways to pay have the shock of the ‘new’ and it stands to reason that people who have got into the habit of using contactless payments regularly are reassured. The data shows that 62 per cent of contactless card users feel it is secure. They also overwhelmingly say that ‘contactless is the future’, that paying by contactless reduces the time they spend in-store and it makes their life easier.
People in urban areas are more likely to adapt quickly to leaps in technology and it is no surprise that the proportion of people using the cards in London has doubled to 25 per cent of the population, while 80 per cent are aware of contactless cards; 42 per cent have them and 25 per cent have used them. In the rest of the UK, awareness levels are the same but only 28 per cent of people have them and 12 per cent use them.
In Tokyo and Hong Kong, rolling the technology out across the transport network has been a turning point for mass adoption. “I can’t help but think that it is related to the fact that there are now contactless payments on London buses and a huge advertising campaign from Barclaycard,” comments Belnikoff.
ICM’s research gives retailers and card providers a clear steer as to what they need to address in order to get more people to use this method of payment. It reveals that consumers’ other major concern about contactless apart from security is availability. The study asks consumers what would encourage them to use contactless payments. Forty per cent say in-store incentives would encourage them and the same percentage say security concerns being addressed.
“In November, we found that awareness of contactless payment cards was high but that there was a retail barrier,” says Belnikoff. “A proportion of people had the cards but few actually used them. It is all very well for the financial brands to push it but at that time the retailers were not promoting it in line with what was going on in the market.”
However, in a mystery shopping exercise carried out in March, eight out of 20 high street shops visited had contactless facilities. “The stores that have contactless payment are starting to push it a lot more,” comments Belnikoff. “They are flagging up that they have got it through signage at the till, and staff are much more knowledgeable about it as well.”
ICM cites both Boots and Wetherspoons as part of a trend towards a ‘radical turnaround’ in awareness and promotion of contactless on the high street. Other retailers embracing the technology include EAT, M&S Simply Food, The Co-op, Greggs, Pret A Manger and Superdrug.
However, it is interesting that some retailers, including convenience stores such as Tesco Metro and Sainsbury’s Local, are not using contactless. “This surprises me as they seem like the ideal places to have contactless – the shops where you pop in quickly to make a low-value purchase,” says Belnikoff.
Others not using contactless payment include Debenhams, Mothercare, Starbucks, Primark and Robert Dyas.
Missing an opportunity
The research also uncovers another dimension to the adoption or lack of adoption of contactless: 18 per cent of people have been unable to make a payment in the past month because they forgot their pin number or did not have enough cash. “These people had intended to spend between £21 and £31 and to me that says there is a real opportunity for contactless to close the loop,” suggests Belnikoff. “Just think of all that lost revenue going out the door – in addition, the research shows that people like paying by contactless and they prefer it to chip and pin.”
Contactless versus mobile
ICM’s studies in November 2012 and March 2013 asked several questions around attitudes towards mobile wallet. In both cases, the research reveals that a third of people say they would be likely to use their phone to make payments for everyday items. There is interest in it and people appreciate what that would bring but the market has not moved on in the way that it has for contactless cards.
“If you get customers using contactless cards, it can be leveraged as a stepping stone to using Mobile Wallet, and brands that don’t invest in this now are missing a trick,” argues Belnikoff. “Mobile phone brands should be excited that contactless is starting to move in the right direction as well as thinking about how to improve consumer appetite for this aspect.”
Brand take aways
As an increasingly broad section of operators come on board with contactless payments, from supermarkets and coffee shops to transport providers, both the payment industry and retailers need to continue to reassure consumers on the security aspect and give people an incentive to use it. Even with mobile phone networks or financial institutions pushing the payment system, if retailers are not on board it is not going to succeed.
Contactless is a growing market and a joined-up approach is key to the success of the technology. ICM’s research shows that people who make contactless payments appreciate its benefits. The challenge for the brands is to reach that tipping point where it becomes a ubiquitous way to pay.
We ask marketers on the frontline whether our ‘trends’ research matches their experience on the ground
Marketing director consumer, Europe
We are in the unique position where we see both sides of contactless: we issue contactless cards to our customers and provide retailers with the terminals to acquire payments. Retailers recognise the benefits such as shorter queues and reduced cost of cash handling. Last year, the number of contactless terminals in the UK increased by 43 per cent, with over 150,000 in use. The likes of EAT, Pret A Manger, Caffè Nero, The Co-op and the M6 Toll are onboard.
Barclaycard has been working in partnership with TfL, supporting the roll-out of contactless across buses in London since December 2012. Nearly 700,000 journeys have been paid for in this way.
At the same time, consumers are also adopting the technology. To underline this, our research of August 2012 shows that customers do understand that they can pay using contactless: over 80 per cent of the public can identify the contactless symbol, an increase of almost double on the previous year. We believe this technology is set to grow rapidly and become more habitual.
Perhaps the biggest challenge for contactless is ensuring availability does not curtail adoption. When availability is limited to city centres, consumers face more of a challenge and embracing the technology fully becomes inconvenient. Retailers, meanwhile, have to consider the cost of changing their payment terminals to accept contactless.
Ultimately, though, it will be consumer demand that drives uptake from retailers. We are committed to working with our merchants and the industry to help them offer the best customer experience and realise the value of contactless.
European marketing vice-president
We are not surprised at the current rate of adoption for contactless payment. To gain momentum, it requires the partnership of a number of different players to create an infrastructure within which this technology can flourish. Key partnerships will need to include device manufacturers, payment bodies, banks, mobile operators, SIM card manufacturers, system integrators and the developer community. There is also a human angle in this technology that we think may be missing, when compared to the near field communication industry that is thriving, such as transport payments cards – Oyster for example.
At Nokia, we look at technology through a human lens. Do the innovations that we bring to market help people to connect together better or more easily? Do they enhance our lives in a small or a large way? We’re quite unforgiving about technological innovations that don’t pass these tests. We are determined to keep focused on making things better rather than more complex for people. In the survey, one question asks consumers what would make them use contactless payments card(s) more often. The equal first response is “I was given an incentive to use it”. This is insightful. Great new technology that has a purpose or connects people in new ways is inherently used.
We’re pursuing innovations in this area since it is a natural step to include payment technology in devices that we all carry around. However, we strongly feel that innovation here needs to have a purpose beyond simply providing a new channel for payment that is not inherently more convenient than existing options.
Senior vice-president, brand management
The survey shows that spend on contactless debit cards has overtaken cash, which reflects the growth we’ve seen over the past year. More people have contactless cards and know how to use them; more retailers are offering the service with better promotion and staff education – including Marks & Spencer – and there have been several high-profile marketing campaigns encouraging use of contactless cards, not only from us but from our members and partners as well.
There is still a need to educate consumers about the multiple security layers that sit behind every contactless payment. That’s something we take very seriously: we’re as confident in Visa contactless payments as we are in any Visa service, and our own research shows that once people start using their contactless cards, their own confidence increases as well.
Transaction numbers increased fourfold during 2012: today there are almost 4.5 million contactless transactions a month, and the numbers continue to grow. By the end of 2013 we’re predicting that there will be more than 16 million transactions a month.
The opportunity for contactless payments is huge. It is about much more than just changing to a card payment. Contactless cards open the door to mobile contactless payments, which are something we believe in passionately. By 2020, we believe that half of all Visa transactions will be made from a mobile device: that’s how significant and fundamental we believe this is going to be.