Contactless Usage May Be on the Rise, Reports Suggest

Information is beginning to emerge indicating that consumer usage of contactless devices for payments may be picking up. According to an Internet survey conducted by Atlanta-based Synergistics Research Corp. late last year, 9% of respondents had used a contactless card or fob. In two previous surveys, both conducted by phone in late 2005 and late 2004, usage had been flat at 4%. The studies involved 1,000 consumers. On Thursday, another researcher, Report Buyer, estimated contactless transactions in the U.S totaled 777 million in 2006 on 27 million cards and fobs, or around 3% of all general-purpose credit card and signature-debit card transactions. The U.K. firm projects these numbers will grow to 2.2 billion transactions on 109 million devices by 2011. It credits factors such as retailers' increasing need to serve customers more quickly and the card networks' push to convert small-value cash transactions to cards for the growth. “Card issuers are rapidly expanding their market presence in contactless payments and the percentage of retailers having contactless payment systems is expected to nearly triple within two years,” says a statement from Report Buyer. Approximately 31,000 U.S. merchant locations accept contactless devices. The reports come amid some skepticism in the industry regarding actual consumer usage of contactless devices. Reports have surfaced in recent months of consumer fears about security and technical difficulties with transceivers, the POS devices that read contactless devices and receive card data from them via radio waves, though these reports have been anecdotal and may refer to isolated instances. In one case, Winston-Salem, N.C.-based BB&T Corp. found early on with its recently introduced contactless Visa debit card program that an unusual number of transactions were being declined. Upon investigation, it found software installed at a convenience store had not been properly programmed to recognize contactless card bank identification numbers and hence bypass the terminal's instructions to prompt for a PIN. Jeff Tansill, a senior vice president at the bank, says the problem affected only a “handful” of transactions and has been corrected. Although American Express Co., MasterCard Worldwide, and Visa USA routinely release numbers for their contactless programs regarding cards and merchants, none breaks out transaction volume. Visa USA says its contactless volume grew last year at an average rate of 34% monthly, a rate it says is continuing in 2007 (Digital Transactions News, April 25). Separately, Sheetz Inc. announced it was introducing a cobranded contactless MasterCard with JPMorgan Chase & Co. with beefed-up rewards for users, including a 10% rebate on all purchases at Sheetz in the fist 90 days the account is open. The Altoona, Pa.-based convenience-store chain, which operates more than 330 stores, first introduced its cobranded contactless card in 2005.