Remind Us Once Again Why We Need Contactless Payments?

from the lining-the-pockets dept

Wed, May 9th 2007 10:13am — Carlo Longino

The mobile payment space continues to grab a lot of interest, particularly as mobile operators envision being able to take a cut of every transaction their subscribers make with their phones. While these sorts of applications have found some success in Asia, they haven't seen a lot of interest among Western consumers. The problem is that many of these contactless payment systems are simply seeking to replace credit cards and pitch themselves as having added convenience for the user -- but that added convenience is minimal, making this a solution in search of a problem. Over at the Digital Money Forum, a blog about contactless payments and other new technologies in the banking and financial-services industry, a post talks about how a contactless payment system would have helped in a particular scenario the author witnessed. He then follows with an anecdote about some colleagues of his that went to Paris with the goal of not using any cash during their trip. They were successful, with the only problem they faced apparently nearly being stymied by a restaurant toilet that required 20 cents' payment. This would seem to undermine the claim that contactless payments are somehow necessary, or even desirable, since it's already somewhat easy in the west to largely get by without cash. Credit and debit cards already offer a convenient payment method for consumers, while retailers will be loathe to shell out for new point-of-sale equipment to handle contactless payments -- particularly when they're trying to push people away from using credit cards and their high processing fees. Until a contactless mobile platform can offer some additional benefits beyond credit-card replacement, they're not going to get very far in the West.

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19 Comments

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Zed, 9 May 2007 @ 9:07am

Dude, you've obviously never used a public transportation system.
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Anonymous Coward, 9 May 2007 @ 10:48am

The "West" is driven more by WallStreet's demands that you achieve obscene profits month over month and less by neat, innovative technology. Some Telco or CC company with declining revenue forcasts will see the opportunity to be first to market with this, creating a huge barrier to entry for others and will jump on it in hopes of keeping the WallStreet dogs off their ass for another couple of quarters. Others, not wanting to be locked out of the market will dip their toes in with their own products.

After all, the margin on an electronic fund transfer (EFT) can be outrageously high. Probably costs pennies, yet most institutions charge $10 - $20 or more for an EFT. This is a high margin transaction. US consumers don't think about the cost, we think about the convenience. If cost were a concern, 18%+ interest rates on credit cards wouldn't exist.

1. Target the high school and college kids who would rather die than leave home without their cell-phones.

2. Give retailers (especially bars and pizza joints) in college towns the necessary hardware and hookups to accept payments via cell phones

Viola...huge, instant market.

3. Work the kinks out then go after the mature consumer.
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- Anonymous Coward, 9 May 2007 @ 11:03am
  
  Re:
  This has the virtue of helping make sure resources arent wasted on crazy ideas that arent worth the money in the end.
  
  Of course, plenty of resources still get spent on crazy ideas that arent worth the money in the end. Hopefully just fewer.
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neria, 9 May 2007 @ 11:10am

Ha
Hey listen guys money will be spent and needs to be spent. We can disagree on the reasons for it but that is just how it is.

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Anonymous Coward, 9 May 2007 @ 11:59am

I will acknowledge that this technology is neat, but I hardly see innovation in it, at this point. All it is is shiny bells and whistles to try and make retailers spend a great deal of money on, in a manner not much more effective then credit cards.
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Luke, 9 May 2007 @ 12:03pm

no cash, yay!
I'm 24 and rarely use cash. The only people who get cash from me are usually in a bar that I'm just dropping in to and don't plan to open a tab. Or I'm paying the cover charge at the door. Everyone else usually gets my charge card. It's 1000 times easier to track my personal spending when the credit card statement shows up and I can say, ok I spent x on food, x on gas, x+1 on pr0n, etc. And I pay off the card each month, but I know that I have a record of most of my expendatures. Makes personnal budgeting a little easier.

Next, I can carry the credit card in my wallet without a second thought, but my cell may stay at home, in teh car, or the batteries may die if I've had a particularly busy day on the phone. Personally, I think we need to do away with cash and make the credit card system more ubiqutous so that the processing fees go down - basically if everyone uses the system the system should be able to give a slightly reduced processing fee per transaction...or so I'd hope.
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Anonymous Coward, 9 May 2007 @ 12:05pm

CC companies and telco's will give away the hardware for free or nearly free. they'll charge a transaction fee to the retailer same as they do for credit cards. it won't cost the retailer much if anything to begin taking transactions this way.

is there innovation...no. Are highschool kids, college kids and most people under 30 demographically inclinded to use their cell phones rather than credit cards in spite of the fact this isn't innovative? absolutely. innovation or not, there's money to be made off of this new generation of kids and the telco's and credit card companies are going to get that money.
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Anonymous Coward, 9 May 2007 @ 12:14pm

Luke made my point for me. The younger generation is looking for convenience without regard for the cost of that convenience. There's no processing fee on CASH! There is on credit cards. Plus the credit card debt in our country is beyond dangerously high proportions as a result. Luke will argue he doesn't have a problem paying his credit cards off, but national statistics show most american's spend more than they make [that's not a good thing]. So...feeding that need for convenience at a $ cost is what the Telco's and CC companies will do with contactless payment methods.

What would be a better plan is to put money into your cell phone or contactless payment utilsil. Then go out and spend to your hearts content. When the money's gone, your spending stops. No credit!
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- Mischa, 9 May 2007 @ 10:32pm
  
  Re:
  My solution is to use a Visa debit card instead. It's accepted every where Visa is and I can't spend more than I already have.
  
  Also, you talk about processing fees on credit cards but that generally isn't something that credit card users pay directly. It is something the retailer pays. I, for one, have no idea how much credit card companies charge for the ability to use credit cards.
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Luke, 9 May 2007 @ 12:17pm

Hm, phone + money
Ok, so I can see people younger than me being really excited about it (I don't know too many people older than me who would think it's a useful idea - I work with a bunch of engineers in there late 20's). Anyway, I just had a thought.

Someone steals my wallet or somehow gets my credit card. I call the cc company and say "My card's stolen turn off my credit." And then you're good to go - time it takes to stop the flow of money is equal to the amount of time it takes you to call the CC company.

However, someone gets your phone which has the payment ability...and I'm sure the average user will have saved the password on the phone or simplified it to the point of just being there for fun. Anyway, I only have the one telephony device. Now I've lost my money, and my ability to stop the flow of money quickly. Basically I see it opening up the possibilty that once the device is stolen there's more time for the crook to transfer your funds elsewhere.

I'm sure there will be safeguards, but it looks like it will introduce more of a mess for all involed parties during an incident.
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Luke, 9 May 2007 @ 12:20pm

Please excuse my typos and poor grammar in the previous post...seems my ability to edit went out the door on that one.
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Anonymous Coward, 9 May 2007 @ 12:28pm

Luke, you're right. Security will be an issue. But it won't stop the advancement of the technology. Look at the internet. Everyone was afraid to type in their credit card information into a website for fear it would be hijacked. Now, everyone is typing in their credit card info thinking their information is safe.

Fact is, your information is still at risk...we read about data being stolen all the time. Best way to safeguard yourself is to NOT TYPE YOUR CREDIT CARD INFORMATION INTO A WEBSITE.

Cell phones with payment capabilities...same thing. There will be neat security measures developed and people will use their phones to pay bills then complain when their phone is stolen and their credit is ruined.
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the amazing mr pete, 9 May 2007 @ 12:43pm

no ta
There was a thing on the radio about this just yesterday (at least something similar anyway). Personally for the kinds of payment they were proposing it should be used for I'd prefer cash.
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Petréa Mitchell, 9 May 2007 @ 12:47pm

Depends how accessible credit is
In researching an upcoming trip to Japan, I've learned that revolving credit accounts are tightly regulated there, with the result that a much lower percentage of the population has credit cards. Major hotels, big stores, restaurants in touristy areas, and so forth which see a lot of foreigners will take them, but a lot of small businesses won't, so you have to carry around a lot of cash. Which is why contactless payments are taking off there...

(Okay, Japan may or may not count in your definition of "West". But it's the example I know about.)
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Anonymous Coward, 9 May 2007 @ 1:03pm

So my phone becomes an electronic ATM card. I'm all in favor or contactless payment. Kill the credit cards! Cash, or cash via contactless payment is the way to go.
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Luke, 9 May 2007 @ 2:21pm

Protection
Here's another reason I like using the credit card instead of cash access: buyer protection.

Most credit cards have a protected limit for which you are responsible to pay back ($50 on my Visa I think). Anyway, the idea is that the big company will do more to get the crook than I can if more than $50 is spent unlawfully. However, I don't get that level of protection if the cash comes out of my bank account.

This, of course, will probably change as more people do more banking online and do direct cash movements electronically.

Anyway, contactless payments could be useful, but I don't see them taking off any time soon here in the US. Perhaps my discomfort with using a contactless cell phone payment is my dislike of cells in general.
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rommel, 9 May 2007 @ 6:49pm

credit cards dont need battery
this technology works in asia and other developing nations because they do not have the infrastructure to handle credit cards. but they do have the network to handle wireless contectivity, i.e. cell phones.

as for westerners, it might be convenient only if your cell phone battery does not die when you need it the most. i have not seen a credit card die because of lack of battery power.
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- Mischa, 9 May 2007 @ 10:37pm
  
  Re: credit cards dont need battery
  The card itself might not die from lack of power but the card reader will.
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luke H, 9 May 2007 @ 9:17pm

The killer app is person to person payments
The feature cell phone payment allows that is currently impossible with credit cards is paying your friends if you owe them money. This comes up all the time when going out, or even splitting bills between roommates. I never have the right amount of cash, and I've been out to dinner countless times where everybody only has 20's and its impossible to settle up debts. Checks are a pain because of the extra effort involved to deposit them. There are already systems to do cell phone payments in the US (obopay for example) but they require you to maintain a separate account rather than being linked directly to a bank account, which is too much trouble to justify the convenience of p2p payments.
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