As he said in an interview with American Banker (subscription required), Wachovia’s Steve Boehm is taking the sensible man’s approach to contactless: wait and see if it takes off and get on the bandwagon when it does. Contactless–like smart cards–is unfortunately a technology in search of a business model to support it.
Some banks and card systems have spent a lot of money and effort trying to roll out contactless payment in the United States. Unfortunately, whatever business case they thought they had for this technology hasn’t played out in the real world.
Merchants don’t see the benefits of spending money to upgrade to contactless. Without merchants on board, the millions of consumers with contactless cards in their wallet can’t really use the contactless feature. Indeed, I suspect most of these supposed contactless cardholders don’t even really know that their card has a chip in it; it’s just the same old mag stripe card they’ve always been using.
A recent Javelin report claims that the number of consumers paying with contactless will double between 2008 and 2013. Maybe, but Javelin has been systematically over-predicting the penetration of contactless. If contactless has a future, it is as part of a mobile phone solution, as Boehm notes.
But, in the United States, mobile phones as a payment device is years away–my optimistic expert friends say 5 years; my cynical friends say 10. Plus, with rapid advances in technology one can’t just assume that the RFID technology for contactless is going to be the way we’ll pay with mobile. So if I were a bank, merchant, or system, I wouldn’t be investing much in contactless until we’re closer to having a business case for it (transit systems in cities with high concentrations of riders is the exception to my rule).
What do you think–are investments in contactless like flushing money down the toilet, or a wise bet on the future?
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Filed Under: Mobile, Payments, New Business Models, two-sided market