Although "Contactless Cards Go Untouched" [Jan. 22] provided a rather dim assessment of the current state of contactless-card-based transactions in the U.S., it is absolutely wrong to conclude that contactless has been a failure.

Far from a failure, the contactless initiatives to date have been a necessary investment toward advancing mobile-device-based transactions. The fact that the card networks and device manufacturers support the same ISO 14442 A/B standard for contactless payments is just one of many successes.

The reality is that contactless cards have not been the endgame for quite some time; the endgame is payments initiated from a mobile device to a contactless reader. The iPhone, Google phone and other smart mobile devices will forever change the payments industry with their ability to house payment, banking, money transfer, loyalty, ticketing, couponing and shopping functionality.

Perhaps one of the most important learnings from contactless initiatives is value proposition. Financial institutions and the card networks need to accelerate working together to create a compelling, differentiated value proposition for retailers, mobile network operators, handset manufacturers, application developers and consumers. Pricing (interchange, fees), merchant liability and chargeback rights, loyalty programs, cardholder agreements, merchant contracts and revenue-sharing agreements and branding must be thoughtfully addressed for mobile-initiated transactions to truly take off.

With mobile devices embedded with near-field communication chips shipping out this year, the time is now for the payments industry to establish its business system and rewrite its rules for mobile transactions.

Furthermore, financial institutions and the card networks must recognize that the mobile network operators, technology companies and other well-financed nonbanks are well poised to leverage the contactless payments infrastructure created by financial institutions and the card networks for their benefit. For financial institutions and the card networks, it is not productive to debate whether contactless has been a success or failure; rather they should work together to leverage the key learnings and investments from contactless initiatives and approach mobile payments with a sense of dire urgency and focus.

Philip J. Philliou, Partner
Philliou Selwanes Partners, New York

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