The results of a pilot Discover Financial Services recently completed of its Zip contactless-payment sticker suggest consumers are eager to use contactless stickers for routine payments as a bridge before Near Field Communication-equipped mobile handsets are available on a mass scale, Discover says.
And while Discover has not said whether it plans to deploy contactless stickers on a widespread basis to its cardholders, the company contends the first bankcard issuers to distribute such stickers could gain an advantage over competitors.
“The first bankcard issuers to provide consumers with mobile payments will have a significant advantage over competitors, and contactless stickers provide a way to get there first–to be the incumbent–during this important bridge phase,” Farhan Ahmad, Discover general manager of prepaid and emerging payments, tells PaymentsSource.
Discover last April launched a Zip pilot involving 700 employees at its facilities in Riverwoods, Ill., and Salt Lake City. Discover says the pilot was the first significant U.S. test of a credit card-based sticker, which initiates payments when tapped on or waved over payment terminals containing similar chips.
Discover polled pilot participants about their experiences and shared the results in a recently published white paper.
“We learned that contactless stickers are in fact a good way to train consumers to use contactless payments and to get them in the habit of expecting the kind of fast, convenient payments we will eventually see with Near Field Communication-equipped mobile phones,” Ahmad says.
Discover mailed Zip stickers to pilot participants with instructions on how to activate and link them to their existing Discover credit cards. Some 90% said activating the sticker was easy and succeeded in doing so with one call to a toll-free telephone number. Some 78% found the stickers immediately easy to use.
An undisclosed portion of pilot participants initially complained they had to tap their contactless stickers several times at the point of sale before transactions were authorized. Discover said throughout the trial it worked with manufacturers to eliminate those problems and fine-tune the stickers’ performance.
Participants were instructed to place their stickers on their mobile phone, personal digital assistant, corporate identification badge “or any other personal item that is always at hand.” Some 44% of participants said they placed the sticker on their cell phone or PDA, while 32% placed it on their identification badge, 13% placed it directly on their wallets, and 11% used other personal objects.
Pilot participants in Discover’s Illinois facility who put the contactless sticker on their identification badge said doing so was especially useful for making purchases from the corporate cafeteria, shops and vending machines, which all are contactless-enabled.
Some 69% of pilot participants said they deliberately tried to hide the contactless sticker under their phone’s protective case, battery cover or other unseen area, while 4% said they wanted the sticker to be clearly visible. Some 27% said the sticker’s visibility was not important.
Asked whether one sticker was sufficient, 51% of pilot participants said they would like to receive an additional sticker at no additional cost to use on a second mobile device such as a PDA or portable music player, and 8% said they would pay a small fee for a second sticker. Some 41% said one sticker was sufficient.
Some 64% of pilot participants approved of seeing the issuer’s logo on the sticker, and 39% said they would like the ability to add their own custom design or artwork. Some 21% approved of including the last four digits of the cardholder’s account number on the sticker, while 16% approved of showing the sticker’s expiration date, 10% approved of displaying the accountholder’s name on the sticker, and 3% approved of including the complete account number on the sticker. Some 19% approved of showing no identifying marks at all on the contactless sticker.
Some 29% of pilot participants said “a different form factor” from the sticker used during the trial would enhance their use, while 29% said better checkout performance would drive more sticker use.
Ahmad acknowledged that the low percentage of merchants that accept contactless payment reduces incentive for banks to issue contactless stickers, but notes that contactless-payment acceptance is rising steadily after a lull last year, with some 70,000 U.S. merchants now supporting payment terminals that accept contactless payment.
Some 78% of participants in Discover’s sticker trial said more merchants accepting contactless payments would make them use their stickers more often. Asked at which types of merchants they most likely would use their sticker for payment, fast-food and convenience stores topped the list at 84%, followed by discount stores (81%), gasoline merchants and supermarkets (78%), entertainment outlets (57%), home-improvement retailers (50%), restaurants (40%), specialty merchandise/electronics stores (38%), shoes and apparel (32%), auto parts and service (26%), and air, hotel and car-rental outlets (23%).
Discover concluded in its white paper that issuers deploying contactless stickers could strike a balance of subtle branding messages, excluding sensitive information such as account names and numbers, and by creating mobile-device accessories that aid in hiding the sticker.
Besides ironing out the kinks in sticker acceptance, one of Discover’s goals with its pilot and white paper is to pitch its Zip technology to third-party bankcard issuers, Ahmad says. “We are sharing what we’ve learned from the pilot with potential bankcard issuers,” he says, declining to indicate which issuers have showed interest so far.
Beth Robertson, Javelin Strategy & Research director of payment research, tells PaymentsSource it would be “a stretch” for an existing bank to sign up with Discover as a third-party issuer primarily to tap its Zip technology because Visa Inc.’s payWave and MasterCard Worldwide’s PayPass already support contactless payments in diverse forms, including cards, tags and stickers.
“Discover has not been heavily active on the third-party issuing side, .... and it would be a real leap for an issuer to go with Discover in order to gain their contactless expertise,” Robertson says.
