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Once it was touch and go, now contactless is a new-wave revolution

19/09/2016

One in every five card payments we make is now contactless, marking a major milestone in the “wave and pay” revolution, industry figures due out soon are expected to confirm.

Contactless payment cards were introduced in the UK in 2007. Initially, the public was slow to embrace the technology.

However, things are really taking off – it recently emerged that spending on contactless cards during the first six months of 2016 has outstripped the amount for the whole of 2015.

Contactless accounted for 18% of UK card spending in June, the most recent month for which industry data is available, and at the current rate of growth will almost certainly have passed 20% by now. As recently as October last year, the figure was 10%. And Brits are now more likely to make a payment using a contactless card than a cheque book.

That said, some people are clearly still wedded to cash - witness Sports Direct founder Mike Ashley pulling out a thick wad of £50 notes when asked to empty his pockets on entering the company’s Shirebrook warehouse this week.

To start with, tap-and-go or touch-and-go – or whatever you want to call it – was largely confined to coffee shops and sandwich chains, but has now moved way beyond that.

It is still a London-dominated payment revolution. It was two years ago next Friday (16 September) that the technology received a huge boost when it became possible to gain access to the tube network, Docklands Light Railway (DLR), London Overground and most National Rail services in the capital, using only a bank card. It’s estimated that since then, around a third of Oyster card holders have migrated to contactless.

But many people still worry about falling victim to fraud. Research this month from Nationwide found that more than half of Brits are “wary” of the new-style cards – with some people going to fairly extreme lengths, such as wrapping their plastic in tinfoil in order to prevent a fraudster armed with a card-reading device from surreptitiously stealing their details.

And on Thursday, MoneySavingExpert.com website warned that a “little-known technological weakness” in the way contactless works means bank cards that have been cancelled after being stolen, can be used to make fraudulent purchases months later. A Guardian investigation in December 2015 had already identified this as a problem.

However, Financial Fraud Action UK says fraud on contactless cards and devices “remains low”, with £2.8m of losses in 2015 – equivalent to 3.6p in every £100 spent in this way.

Meanwhile, some experts reckon contactless cards might eventually go the way of Betamax and other obsolete technologies, as mobile phones and wearable technology take over.

The headline stats

Around £9.27bn was spent on contactless cards between 1 January and 30 June this year, according to the UK Cards Association. That’s more than the total 2015 spend of £7.75bn.

There are more than 92m contactless cards in the UK’s wallets and purses, of which 65m are debit cards, and these can be used at more than 400,000 locations across the country.

Earlier this month it emerged that the use of contactless payments has now overtaken cheques.

Research from Mintel showed that cheques were used by less than one-third (31%) of Brits during the three months to April, putting them well behind contactless debit cards (39%) and contactless credit cards (34%). Some 97% of Britons used cash during the period - which does make you wonder how the other 3% managed to get through three months without paying for anything with notes or coins (presumably this 3% includes the Queen and others too posh to carry cash).

Hey big spender!

On 1 September last year, the maximum limit for a single contactless transaction rose from £20 to £30.

This was seen as a hugely important move because the average debit and credit card transaction in a supermarket is worth just over £25, and therefore lifting the maximum above this would make big retailers more interested in being involved.

Some may be surprised to learn that the average amount spent in each transaction is still well under a tenner – it was £7.72 in October last year, and £8.60 in both May and June this year. The figures are probably skewed by the large number of morning coffees, lunchtime sandwiches and London tube and bus journeys that still make up a good chunk of the total, despite more retailers comning on board.

There are no plans to hike the maximum above £30 – though some other countries let people make bigger-value payments using contactless. The equivalent limit in Australia is $100 (£57), and in Canada it’s $100 (£58).

The refuseniks and laggards

There are still many people who are locked out of contactless. HSBC has embraced the technology for its debit cards, but for some unknown reason it won’t give its credit card holders access.

Similarly, Nationwide has more than five million new-style debit cards in circulation, but its credit cards don’t allow contactless payments. But this is about to change – a rollout of the new technology to these customers is due to begin later this year, possibly in November.

In terms of retailers, Sainsbury’s sticks out as a biggie that has still not installed contactless payment systems in any of its shops. Search on Twitter for “Sainsbury’s” and “contactless”, and you will get a flavour of what customers feel about the retailer’s seemingly Luddite stance. “When the f are Sainsbury’s going to get contactless?”, “Seriously @sainsburys, it’s 2016. When are you getting contactless payments?” and “Hey @sainsburys can you stop mucking around with the £3 meal deal and get contactless in please” are just a few of this week’s tweets on the subject.

Sainsbury’s told Guardian Money that the wait is about to end, and it will be introducing contactless “before the end of the year”. But don’t hold your breath – in August 2015 it said it would launch contactless “before the end of the year” (yes, the exact same words).

A big-name refusenik is John Lewis, which says it has no plans to go contactless at any of its 46 locations because the average transaction value at its department stores is above £30. Its Waitrose division rolled out the new technology in 2012, and last month announced it had opened its first “cashless” store at Sky’s new head office building at its campus in Osterley, west London. Sky employees are only able to pay by card or with their mobile device at one of the five self-service checkouts.

Who and where?

According to data issued by Barclaycard last month, over-60s are adopting contactless “in their droves”, with this age group now outnumbering 18 to 25-year-olds in terms of take-up. Yet the new Nationwide research paints a different picture: it says over-55s are “the most wary” when it comes to making contactless payments, with less than half (45%) adopting the technology, compared with 70% of those aged 25 to 34.

London remains ahead of the rest of the country, with almost four in 10 of all card transactions of £30 and under now paid for with contactless, says Barclaycard. The capital’s dominance is largely down to more retailers accepting the technology, plus the popularity of contactless across the Transport for London network. The provider claims the rest of the country is “quickly catching up,” with Glasgow, Blackpool, Edinburgh, Cardiff and Hull seeing the biggest increases in usage. In each of these locations, contactless spending is up between 260% and 290% this year compared to last year, whereas the figure for London is 116%.

Meanwhile, just over half of all Brits now use contactless, and the most common places for making payments are shops, supermarkets, restaurants and bars, says Nationwide. It adds: “Only 17% of people currently use contactless on public transport, as this option is only really available in London, but with more cities making the technology available later this year, this is expected to increase.”

The UK Cards Association says it is “working with transit operators on bringing contactless payment to public transport in other parts of the country”. It says it has already developed two models (one for using your card for single journeys, for example on a bus, and the other for multiple journeys) and is now working on a third, where you would buy a ticket in advance with a card and then use that card at the barrier without having to print out a ticket.

Transport for Greater Manchester says it is “not there yet” in terms of people being able to use contactless payment cards and mobile systems such as Apple Pay to pay for journeys on public transport. It is currently rolling out an Oyster-style smart card called Get Me There for services such as Metrolink.

The Guardian

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"The technology had a slow start, but today we are using it to make one in every five card payments."
The Guardian