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62


Future of Retail — Payments Innovation


issue 02


It may be too early yet to see the full potential of mobile payment solutions but it would be foolish to suggest that they will not prevail in the longer term.


the wider public transport community and in time we should see contactless bank cards accepted widely for travel. We are also looking at how contactless can help the charity sector to reverse the reduction in low value cash donations by supporting the piloting of portable fundraising devices and new fixed indoor and outdoor donation points. With the acceptance platform available and an


increasing awareness amongst consumers of the utility and value of contactless technology, we can anticipate further innovation. It seems likely that this will be based around the delivery of new services through mobile devices. Why mobiles? With Millennials now outnumbering the Baby Boomers we have a generation of consumers who are wedded to their smartphones and expect all their services to be delivered through this channel. That is not to say that we will see the back of the traditional bank card, just like the cheque they will have a part to play long into the future. Following Apple’s lead we have seen Android Pay


launched in the UK this year, and we can anticipate that Samsung Pay will follow in the near future. Individual banks have also launched their own wallet solutions as they too seek to provide for the mobile generation. It may be too early yet to see the full potential of mobile solutions but it would be foolish to suggest that they will not prevail in the longer term. Contactless technology is also entering our lives


through the things that we wear, with all manner of new form factors appearing, ranging from wrist bands and rings to items of clothing. So the future looks bright for contactless cards and for


the new mobile solutions that are arriving in our market. They certainly provide the most convenient method of transacting quickly and securely that consumers have ever had. What could possibly stand in its way? The answer it seems lies in the more obscure elements


of recent Interchange Fee Regulation. Articles 8 and 10 of the EU legislation, on the face of it designed to


foster competition and choice, may in fact undermine the slick processing procedures that make contactless transactions so easy to complete. Article 8 deals with co-badging of cards and the


choice of payment brand or application. In a recent press release the European Commission confirmed that, to address a perceived problem of a cardholder having multiple cards from a single issuer, from now on consumers will be able to require that their bank co- badge a single card (or mobile phone) with all the card products they issue to the customer. Naturally, to support such cards, point of sale devices


would need to be adapted to list the applications on the card so that the customer can select the one they want to use. This choice of application is further complicated by another ruling that allows the retailer the option to promote the most ‘cost-efficient’ brand to minimise their costs. The regulation is equally applicable to contactless


cards and mobiles and its natural consequence for contactless transactions will be the introduction of a two tap process. The first tap to offer up the supported applications for selection and a second to execute the transaction. Such an approach seems to undermine the convenience offered by contactless cards and we wonder if this would turn people away from using contactless. Surely it would be more convenient to simply dip your card? For the UK market it is unclear whether there is any real


consumer demand for co-badged cards. What proof do we have that their availability will provide greater choice or control over the way they pay? For many it seems that the opposite will be true, there will likely be more difficult and complex processes at the point of sale, which will benefit neither the customer nor the retailer. It may turn issuers away from offering cards from multiple brands. Article 10 concerns the honour all cards rule and


again it is the unintended consequences of the strict application of the regulation into the pre-existing


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