Visa Inc. last month must have had payments executives scratching their heads. It started on Feb. 9, when the card brand announced the expansion of its “No Signature Required” policy for magnetic stripe card transactions less than $25 to 98% of all merchant types. Industry reaction immediately after the announcement was that Visa’s move may undermine its contactless-payment initiative, which similarly is designed to speed up the check-out process.
“The no-signature rule changes have taken away a good chunk of the contactless value proposition,” Red Gillen, a senior analyst with Celent, told PaymentsSource shortly after the announcement. “If a magnetic stripe card can come close in terms of speed (for low-ticket transactions), what’s the big deal about contactless?”
But then on Feb. 15, Visa announced at the Mobile World Congress in Barcelona plans to offer issuers contactless-payment chips they could offer customers that would embed in the memory card slots of most mobile phones. Though not the long-awaited Near Field Communication technology that would enable phones to conduct two-way communications with other NFC chips for payment and downloading functions, Visa’s announcement seemed to contradict, if not clarify, its contactless intentions.
Indeed, as our story on page 12 by PaymentsSource Senior Editor Kate Fitzgerald points out, the market for contactless payment has been languishing. Merchants have been reluctant to back a payment function not available on most cards, and issuers have been reluctant to offer technology relatively few merchants accept–the chicken-or-the-egg dilemma that plagues most new products requiring both issuance and acceptance support.
But what also has caused delays in NFC rollouts is determining how the various players, including banks, handset makers, SIM card manufacturers and telecommunication companies, would divvy up revenues from NFC transactions. What Visa’s chip does is place more of the revenue squarely in banks’ laps, leaving the telcos and handset makers out in the cold.
Turnabout is fair play, I suppose, as mobile operators in Germany and Austria have launched mobile-payment schemes that cut conventional banks out. And Japan’s largest mobile operator, NTT DoCoMo, similarly has chosen to go it alone.
The next few months could prove crucial for the future of contactless. If issuers flock to Visa’s mobile contactless offering, will it motivate quicker resolution of the revenue-sharing aspects of NFC? And does the payments industry really need NFC?
Time will tell.
Jeffrey Green
Editorial Director, Payments Group
Editor-in-Chief
PaymentsSource
