Stores Magazine - December 2007 - (Page 60)

NUTS AND BOLTS / CONTACTLESS PAYMENTS less Wallet at 50 merchants in the test markets of Jackson, Miss., and Memphis, Tenn., were interested in using their cell phones as electronic wallets once the service becomes commercially available. Cellular South, which worked with Bank of America to pilot Wireless Wallet, plans an official rollout of the product in 2008 – and it’s unlikely to be alone. Jupiter Research projects that, by 2011, 12 percent of mobile phones in circulation worldwide – nearly 470 million — will offer support for contactless payments using NFC technology, and the market for mobile payments will top $11.5 billion. vulnerabilities” that allowed them to crack the codes protecting the chips. Very little has been written since then, however, and experts say that’s because contactless cards actually offer better protection against fraudsters than traditional cards. Safer than mag-stripe “There’s no doubt that contactless technology is safer than ordinary magstripe alternatives,” says Steve Mott, president of technology consulting firm BetterBuyDesign. For starters, fraudsters would need to develop the tools necessary to lift card account information from a contactless 81 percent of retailers expect to increase spending on contactless adoption over the next two years. Fraud deterrent It is perhaps an innovator’s worst nightmare. A new product or technology starts to take off, acceptance grows, and then questions arise about the safety or propriety of adoption. For contactless payments, the bad press came about a year ago when several media outlets, including The New York Times, reported that a group of scientists had devised a way to lift personal data off the computer chips that drive contactless cards, key fobs and the like. The chips, which contain basic account information, use radio frequency technologies to communicate with POS terminals. The scientists, a group affiliated with MIT, described “surprising 60 STORES / DECEMBER 2007 device. Considering that information is available relatively cheaply on the black market, “It’s just not worth the cost and risk,” Mott says. And most banks’ systems for identifying potentially fraudulent contactless transactions “are similar to those used for card-not-present transactions,” says David Guerin, vice president for payments at San Antonio-based BSG Clearing Solutions. “Contactless is definitely a superior product to the mag-stripe product from a security perspective,” Waugh said, and “it will be a critical part of securing credit and debit card payments in the future.” Charles Walton, executive vice president at INSIDE Contactless, a European firm that manufactures chips for contactless devices, sees benefits in the technology for all parties to POS payments. “There are enormous opportunities for [card] issuers, consumers and retailers,” he says. “The challenge is to get it right.” At Arby’s, getting it right means getting more banks on board. “For retailers, this all boils down to ROI, and a problem I see is a lack of issuers in the market,” Waugh said. “We certainly aren’t where I’d have expected us to be at this point.” According to the Smart Card Alliance, 11 banks and American Express have combined to issue some 30 million contactless card devices; several industry sources estimate there are roughly 500,000 POS terminals that can handle contactless payments. But card issuers are not the only organizations lagging on the adoption curve. Adil Moussa, payments industry analyst for the Boston-based Aite Group, says companies that process credit and debit card transactions show little interest in selling contactless payment functionality to merchants. In fact, none of the major card acquirers recently queried by Aite believe contactless payment functionality is critical to wooing new merchant clients. “They see it as a neutral benefit at best,” Moussa says. Meanwhile, a survey by Aberdeen Group found 81 percent of retailers expect to increase spending on contactless adoption over the next two years. Walton encourages banks and retailers to add functionality to contactless chips, such as tying use of the devices to loyalty programs. This creates “a very powerful tool for retailers to implement so that they can take advantage of contactless in StORES a broad way,” he says. Patricia A. Murphy, a Maryland-based writer specializing in payments and technology, is president of The Takoma Group (www.takomagroup.com). WWW.STORES.ORG http://www.takomagroup.com http://WWW.STORES.ORG

Table of Contents Feed for the Digital Edition of Stores Magazine - December 2007

STORES - December 2007 Contents Executive Editor's Page President's Page Holiday Shopping Extravagance What Shoppers Think 10 Things You May Have Missed Numbers Worth Counting Full Price/Markdown Retail People Niche Marketing Eight Predictions for 2008 Concept2Watch Merchandising Strategy Sourcing E-Commerce Supply Chain Warehouse Management Software Contactless Payments Marketing Marketing Online Loeb Retail Letter ARTS Update Point of View NRF News Retail Industry Calendar Last Laugh

Stores Magazine - December 2007

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