May 14th, 2012

Near Field Communication – will it take off?

Some say this is the year of the contactless payment, although in truth it’s not really taken off yet. I remain dubious about it being this year but the market is definitely growing.  It’s likely that the UK will follow in the footsteps of Japan (as always) and that near-field communication (NFC) payment will slowly be integrated into our daily purchases. Following my last blog introducing NFC, there have been some interesting updates in the world of contactless payments.

Firstly, this technology has been widely criticised over security. In particular, Channel 4 news recently reported on the dangers of data theft. They found that by just holding a mobile phone over a contactless card they could lift the name, card number and the expiry date. Then they took these details and bought goods from Amazon relatively easily.

This could then lead to much more serious issues such as identity theft; we all know data is getting more and more valuable so any new advancement in this technology clearly need to focus on high security and data encryption.

This said, a study by Pew Research showed around 33% of people asked don’t trust devices with NFC technology. At the moment there are 19.6 million contactless cards in the UK but only 73,000 terminals in retailers nationwide. So I believe if they keep cropping up in more retailers (which is definitely on the cards – no pun intended!) then it will be used much more. However, as it stands take-up will probably be stunted by data and security problems.

Another point to note is that card payments are actually a lot more costly for the retailer. The British Retail Consortium (BRC) recently estimated that cash costs a shop around 1.7p per transaction, for debit cards 9.2p and 37.1p for credit cards.

Cash still accounts for a third of the value of all transactions in the UK and the BRC in its annual report said it was pointless to include contactless card payments as a separate entity as they account for such a small proportion of transactions at the moment.

So is this something worth keeping up to date with? Yes, but the huge buzz at present suggests that by next week we will all be burning our wallets when in fact that’s still a long way off. After all, so many places still don’t even accept cards at all, let alone contactless ones.

By Karen Hawey