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The remarkable growth in the volume and value of contactless payments across the European Union is the most obvious evidence of an evolving payments ecosystem. The UK Cards Association recently reported that over £2.5 billion was spent using contactless cards in the first half of 2015, and figures from MasterCard showed that their use by British consumers went up more than five-fold in the space of a year.
Stretching contactless limits
With the payment limit recently upped from £20 to £30, the average basket of goods is covered by a single contactless transaction. Recent polls indicate that at least a quarter of shoppers prefer contactless technology, which is unsurprising as it is simply easier. Observers predict that virtually every retailer will offer contactless payments by 2020, paving the way for the disappearance of the oft-dreaded £5 minimum spend. In order to continue to take card payments, all shops will have to install contactless terminals.
The contactless players
Contactless-enabled chips have become the norm, and the evolution of payment technology towards ever-greater convenience has spurred the uptake of mobile payments. Apple Pay launched in the UK in July 2015, allowing shoppers to make transactions using their Apple devices in lieu of contactless cards. Alternative mobile payment services include Google Wallet, Android Pay and the recently launched Barclaycard bPay wearable devices. In September, Barclays announced it will become the first financial services brand to permit high-value payments on Android devices, enabling its customers to make contactless payments of up to £100 armed simply with their PIN and mobile device.
Contactless technology helps merchants reduce queues and serve more customers during busy periods, ultimately providing a better in-store experience. The benefits of mobile wallets are in the same vein, though the definition of a mobile wallet isn’t entirely clear-cut. They come in several forms and are essentially containers for disparate information – cards, codes, passwords – that transmit the appropriate authenticating signal for the transaction at hand. Like a real wallet, they hold all your cash and cards, as it were. To stay competitive, most retailers will necessarily install the requisite technology to connect to customers’ wallets.
As is the case with any new technology-enabled product, the security of emerging payment systems presents challenges, especially because mobile payments require multiple transfers of data. Traditionally it has fallen to financial institutions to address the security risk, but in this new world of contactless and mobile payments, all parties, including the end user, would do well to take steps to protect personal data.