Tool Can Calculate Contactless' Benefit

A trade group that promotes the use of contactless payment cards has developed a tool to help merchants determine whether it makes economic sense to invest in the terminals needed to accept them.

The Smart Card Alliance announced Tuesday that merchants can download the Merchant ROI Model from its Web site. The tool is an Excel spreadsheet that asks merchants to input such information as their transaction volume and revenue; it can calculate how large a revenue lift the merchant can expect from faster throughput and other factors.

"Merchants have to ask those hard questions about making any investments in their payments infrastructure," Randy Vanderhoof, the executive director of the Princeton Junction, N.J., trade group, said in an interview Tuesday.

The tool can help merchants "understand what the payback might be for accepting contactless payments. Merchants say the expense must be justified."

Installing contactless payment terminals can cost from $100 to $300 per device, he said, though the cost of an upgrading varies by merchant, depending on factors including their current payments system and the features they want to have.

The alliance has said that payments made with contactless cards are typically processed faster than payments using standard, magnetic stripe cards or cash and that customers spend 30% to 40% less time at the point of sale. For stores with high volumes, this translates to higher revenue.

Customers using contactless cards instead of cash also tend to spend about 20% to 30% more per transaction.

Mr. Vanderhoof said his group has also introduced an online forum where merchants can discuss the pros and cons of accepting contactless payment cards.

Several major players in the payments industry contributed data and other resources to the Merchant ROI Model, including Kohlberg Kravis Roberts & Co.'s First Data Corp., JPMorgan Chase & Co., Discover Financial Services, and VeriFone Holdings Inc.

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