Contactless payments hamstrung by battle for hearts and minds

The contactless payment industry needs to change the perceptions of both retailers and consumers if the technology is to take off in the UK, according to industry insiders.

Despite an increasing number of payment cards issued with contactless functionality - Barclays recently pledged to have all of its debit cards contactless by 2011 - the technology remains niche. Just eight per cent of Britons claim to have used contactless debit or credit cards.

And while a handful of high-street names, including Boots, Coffee Republic and Pret A Manger, are already trialling or deploying contactless payment technology, the majority of retailers remain unmoved.

According to Oliver Steeley, head of business strategy for MasterCard UK and Ireland, education is key in persuading retailers to adopt contactless payments.

"Let's not pretend [widespread take-up] is going to happen overnight. There are other retailers that are still to be convinced. Don't underestimate the amount of education that needs to be done," he told a recent roundtable hosted by payment hardware maker Ingenico.

Part of this education, according to the MasterCard exec, is to make retailers aware of the benefits that proponents of the tech believe it offers.

One such benefit is that the technology speeds up transaction times as shoppers don't need to fumble for their wallets or wait for their change, leading to reduced queuing.

A less obvious benefit perhaps is that using contactless payments means retailers have less cash to deal with. As a result, there's a lower security risk for the retailer as well as cost savings in the secure transportation of cash from shops to the bank.

According to Alistair Newton, research VP in Gartner's banking industry advisory team, the payments industry itself needs to play a key role in convincing retailers that the technology could be beneficial. "The banks have to persuade the retailers of the business case for this," he told silicon.com.

However, Newton added the payments industry should focus on promoting the technology to a particular section of retailers where the technology makes most sense: considerations such as a £10 spend limit - which is in place for security - mean contactless payments aren't suitable for every kind of retailer.

Businesses selling low-cost products at a rapid rate - such as fast food outlets in cities - could prove a sweetspot for the 'wave and pay' tech.

"If you're a large supermarket the benefit from contactless is limited. Yes, there might be slight increase in speed past the till, but you've got a £10 limit anyway. From a retail point of view, it's pretty much restricted to a subset of retailers... You've got to get some sort of critical mass of retailers on board and at the moment, we don't see that," he added.

But it's not just the retailers that need to be better informed about contactless payment if it's to take off according to Kieran Hines, lead cards and payments analyst for Datamonitor.

Hines told silicon.com that a lack of consumer awareness about the technology is a major issue, with Datamonitor research estimating that only half a million people who have contactless cards realise that it has such functionality. With some two million cards in circulation according to the UK Cards Association, it's clear awareness needs to be tackled.

It's perhaps the biggest quandary facing contactless payments: without retailer backing, consumers can't and won't use wave and pay. However, without a push from consumers, retailers will remain unwilling to spend their hard-earned profits on deployments. Without solving this chicken and egg problem, contactless payments could remain at an impasse for some time to come.