Seventy per cent of people will walk out of a shop if the queue is too long, latest research by Visa reveals. But what if there was something that could speed up time-consuming transactions and reduce those queues? The answer could be contactless payment systems - otherwise known as 'wave and pay'.
The technology is already well established in the US with some convenience store operators there using it for more than a year. In a bid to make the purchasing process faster and easier for its customers, US-based Sheetz installed contactless card readers in each of its 310 stores last year and accepts both Visa Contactless and Mastercard PayPass contactless payment cards.
According to Visa tests in the US, wave-and-pay transactions are up to 25% faster than cash and enable retailers to track the day's receipts electronically. Customers make a purchase by simply waving their contactless card near a secure reader at the checkout, instead of swiping it.
The technology was first introduced in London in 2003 in the form of the Oyster card by Transport for London. Anyone who's used the London Underground or ridden a London bus will have noticed the yellow card readers at each gate in Tube stations, or next to the driver on every red bus. Commuters charge up their card and touch the yellow reader with it, instead of having to queue up for a ticket each time they travel. Wave and pay would work in a similar way in c-stores.
Because contactless payment is designed for low-value transactions - up to about £10 - it's ideal for the c-store sector. Frank Pocock, head of retailer relations at Visa Europe, says: "Wave and pay lends itself very well to convenience stores. I think we will see it in that sector in the next 12 to 18 months. From the retailer's perspective, convenience and speed are vital. Consumers won't queue; they'll walk out of a store if the queue is too long.
"The technology is robust and the applications are clear, particularly in the UK following the rollout of Chip and PIN, which consumers and retailers have adopted readily. I think we'll see a full rollout of wave and pay in the next two to three years in the UK."
A pilot for Visa Contactless is due to kick off next year, but the company is yet to announce in which locations. "The retail pilot will last for a year and will be in a coffee chain, fast food outlet and a newsagent," is all Pocock will reveal.
As a worldwide sponsor of the Olympic and Paralympic Games, Visa has made the London 2012 event the focus for Visa's activity and is acting as a deadline for the introduction of wave and pay. Visa's objective is for the London 2012 games to be cashless and ticketless. "From the morning paper to the evening meal; from the tube pass to the flight ticket; from the daily sandwich to the special souvenir; we want to be sure that Visa cards are widely accepted and warmly welcomed," claims Visa's literature.
The company says that by 2012 it will be possible to travel the breadth of the UK using every type of transport and buy refreshments along the way, without ever having to revert to cash. It also expects Visa debit and credit cards to account for more than a third of day-to-day consumer spending; cards to be routinely used for transactions of less than £5; that the UK will be home to the world's largest acceptance network for contactless payments; and Visa-branded prepaid cards to be commonplace.
It all sounds great, but without the need for shoppers to input their PIN number, or sign a transaction slip, could there be security concerns about contactless payment? Pocock says not: "These will be low-value transactions, say, up to £10. And after X amount of transactions the technology may also force it online, so the consumer will need to input a PIN. The retailer can force the transaction online if they're suspicious, too."
Retailers may also be concerned about the cost of installing equipment to enable contactless transactions, especially after the investment of Chip and PIN, but Pocock assures that existing systems can be easily upgraded. He adds that the cards needn't be the sort shoppers can keep only in their wallet, which will help add to the 'convenience'. "We're looking at miniature cards that could attach to a key ring or mobile phone," he says.
Meanwhile, Mastercard Europe revealed six months ago a solution to "eliminate cash from its stronghold of low-value payments" - those below E15 (£11). A pilot of the PayPass contactless technology kicked off this summer with the Royal Bank of Scotland.
Mastercard Europe president Dr Alexander Labak says: "Low-value transactions where consumers traditionally rely on cash are the next frontier for debit cards. By breaking cost barriers and creating a simple alternative to cash, we're generating a win-win situation for banks, consumers and merchants."
The rise in use of the Oyster card in London proves that Britons are open to the idea of wave and pay. By 2004 27% of weekday Underground journeys and 18% of weekday bus journeys were made using an Oyster card, and last year Transport for London announced it was pushing ahead with a scheme that could see commuters in the capital use their Oyster smart cards to buy goods and services at c-stores and other locations.
While it hasn't taken off as yet, a spokesman for Transport for London says: "We invited companies to tell us how we could adapt Oyster for pay-as-you-go on low-cost items, but after a thorough examination it's not economical for us to progress at this time. We're continuing to look at alternative ways to link e-money with Oyster, but it needs to be of benefit to our passengers and provide revenue that can be invested back into the transport network."
Behind the prospect of wave and pay lies a continuing growth in the use of credit and debit cards. Use of debit cards grew by 9% in 2005, while cash use slumped by 4%, according to Visa's research. And research by the Halifax claims that by 2008, the volume of payments made by plastic is expected to reach more than seven billion, compared with 4.8 billion in 2002.
In the past decade the proportion of payment by cash has fallen from 74% to 63% and Visa's research suggests that in eight years fewer than half of all payments will be made by cash.
"We are seeing growth in plastic right across Europe - turnover from debit cards has overtaken cash and we can only see that gap widening," says Visa's Pocock. "Consumers want speed and convenience, both in payment and shopping experience, and they want to be flexible and spontaneous in their shopping. What's key to consumers is that they have peace of mind in that payment. People are less comfortable carrying cash around."
Cards have evidently outstripped cheque use, too. Figures from APACS show that cheque usage is declining at a rate of about 8% each year. "Retailers have realised that cheques are very costly to them and slow," says Pocock. "We've seen a number of retailers saying no to cheques altogether, most notably Shell in September 2005. Consumers' love affair with cash and cheques is waning fast."
Another development has been in prepaid cards that allow consumers to load up the card with cash and spend only up to amount. The cards are hugely popular in the US, and there are currently 3.5 million Visa prepaid cards in circulation in Europe, mostly in Italy, according to the company.
"We've seen phenomenal growth in prepay cards, and we're putting lots of creative thought into card design - such as our denim-feel cards," says Pocock. "Prepay cards are ideal for kids."
Last autumn Mastercard launched the Cashplus prepaid card. Shoppers don't need a bank account or to undergo a credit check, and the card isn't visibly branded as a prepaid product. The card costs £9.95 and consumers can choose between paying a monthly subscription of £4.95, or £1 per transaction.
Payment card provider Bluecorner, meanwhile, has been targeting teens with its prepaid cash cards. It has developed co-branded cards with Mastercard and EMAP, consumer magazine publisher of teen titles such as Bliss and Smash Hits. Like Cashplus, these are
not credit cards and are not connected
to any bank account. They have no age restriction and no credit checking requirement, making them ideal for
teenagers.
So with card use on the rise and the prospect of contactless payment, what does the future hold for cash? According to Russell Carter, head of cash at Alliance & Leicester Commercial Bank, consumers and retailers are still just as keen on the hard stuff. "The death of cash is one of the big myths of our times; it just doesn't ring true," he says.
"When shoppers head to the tills, our research shows that a whopping seven out of 10 consumers prefer to pay in cash. They tell us that the humble coin and note come into their own when consumers try to manage their money. Of those who favour cash, 42% say it helps them keep a closer eye on their finances and a third reveal that carrying cash makes them feel more 'in control'."
Carter adds that cash also makes sense to retailers. "We know that more than four out of 10 retailers cite cash as their preferred payment method. More than one in seven retailers say the end of cash would have a disastrous effect on their business, while a further quarter say they would have to make significant changes to their stores."
Carter maintains that cash is more desirable to small businesses because of cost implications. "Half think that cash is both cheaper and easier to manage than other transactions. A further 40% say that the cost of processing cheques and credit cards is just too high."
While Carter is convinced about the future of cash, he admits that retailers aren't all getting the best deal from their bank for cash handling. "Collectively, the country's small businesses could claw back more than £75m on cash transactions alone if they shop around for lower charges," he claims. "For example, the average small to medium-sized enterprise spends more than £450 on cash transactions each year when they could be paying less than £150.
"For many retailers, shopping around for the best cash handling charges can make a big difference to the bottom line," he adds.
Greg Twitcher, vice-president of
relationship management at Visa Europe, says: "Our argument has always been 'What is the true cost of cash?'. There's a security issue with cash and cash handling costs. There's a risk of holding too much cash and the advantage of cash back is that it gets cash out of the tills. If you get a fake note you're not reimbursed. Staff mistakes and theft are also a consideration - but that's not a problem with cards."
And Pocock adds: "I'm not going to make any predictions as to the end of cash, but every year we see a growth in cards, cheque-use goes down, and cash is seeing a reduction. I don't expect us to live in a cashless society, but we can reduce the amount of cash used. The convenience market is realising the cost of cash and cheques and the convenience of plastic. The increase in transaction value that cards brings is balancing out the merchant fees."
Britons' tolerance for queuing seems to be waning. Visa's 'Understanding Everyday' research shows that more than half of adults in the UK are more impatient now than ever before.
The findings reveal that:
? 70% of people will walk out of a shop if the queue is too long
? 76% take advantage of late-night and 24-hour openings at supermarkets
? 43% use self-service checkouts to speed up their shopping experience
? Nearly two-thirds of people use their local shops because of shorter queues
? 37% avoid shops altogether by doing their shopping online
? On average people start to get seriously annoyed after 13 minutes
in a queue
? 10% of adults become seriously annoyed the moment they are in a queue.
Irritated customers may look to take their custom elsewhere if they start to associate a particular store with queuing and slow service, warns the Visa report. By the time they reach the front of the queue they may be more aggressive or rude, which impacts on staff morale.
The research also points out that emerging technologies are having a significant impact on this issue, with a recent survey into retailers' attitudes to Chip and PIN showing that 62% of retailers find that Chip and PIN transaction times are faster.
The technology is already well established in the US with some convenience store operators there using it for more than a year. In a bid to make the purchasing process faster and easier for its customers, US-based Sheetz installed contactless card readers in each of its 310 stores last year and accepts both Visa Contactless and Mastercard PayPass contactless payment cards.
According to Visa tests in the US, wave-and-pay transactions are up to 25% faster than cash and enable retailers to track the day's receipts electronically. Customers make a purchase by simply waving their contactless card near a secure reader at the checkout, instead of swiping it.
The technology was first introduced in London in 2003 in the form of the Oyster card by Transport for London. Anyone who's used the London Underground or ridden a London bus will have noticed the yellow card readers at each gate in Tube stations, or next to the driver on every red bus. Commuters charge up their card and touch the yellow reader with it, instead of having to queue up for a ticket each time they travel. Wave and pay would work in a similar way in c-stores.
Because contactless payment is designed for low-value transactions - up to about £10 - it's ideal for the c-store sector. Frank Pocock, head of retailer relations at Visa Europe, says: "Wave and pay lends itself very well to convenience stores. I think we will see it in that sector in the next 12 to 18 months. From the retailer's perspective, convenience and speed are vital. Consumers won't queue; they'll walk out of a store if the queue is too long.
"The technology is robust and the applications are clear, particularly in the UK following the rollout of Chip and PIN, which consumers and retailers have adopted readily. I think we'll see a full rollout of wave and pay in the next two to three years in the UK."
A pilot for Visa Contactless is due to kick off next year, but the company is yet to announce in which locations. "The retail pilot will last for a year and will be in a coffee chain, fast food outlet and a newsagent," is all Pocock will reveal.
As a worldwide sponsor of the Olympic and Paralympic Games, Visa has made the London 2012 event the focus for Visa's activity and is acting as a deadline for the introduction of wave and pay. Visa's objective is for the London 2012 games to be cashless and ticketless. "From the morning paper to the evening meal; from the tube pass to the flight ticket; from the daily sandwich to the special souvenir; we want to be sure that Visa cards are widely accepted and warmly welcomed," claims Visa's literature.
The company says that by 2012 it will be possible to travel the breadth of the UK using every type of transport and buy refreshments along the way, without ever having to revert to cash. It also expects Visa debit and credit cards to account for more than a third of day-to-day consumer spending; cards to be routinely used for transactions of less than £5; that the UK will be home to the world's largest acceptance network for contactless payments; and Visa-branded prepaid cards to be commonplace.
It all sounds great, but without the need for shoppers to input their PIN number, or sign a transaction slip, could there be security concerns about contactless payment? Pocock says not: "These will be low-value transactions, say, up to £10. And after X amount of transactions the technology may also force it online, so the consumer will need to input a PIN. The retailer can force the transaction online if they're suspicious, too."
Retailers may also be concerned about the cost of installing equipment to enable contactless transactions, especially after the investment of Chip and PIN, but Pocock assures that existing systems can be easily upgraded. He adds that the cards needn't be the sort shoppers can keep only in their wallet, which will help add to the 'convenience'. "We're looking at miniature cards that could attach to a key ring or mobile phone," he says.
Meanwhile, Mastercard Europe revealed six months ago a solution to "eliminate cash from its stronghold of low-value payments" - those below E15 (£11). A pilot of the PayPass contactless technology kicked off this summer with the Royal Bank of Scotland.
Mastercard Europe president Dr Alexander Labak says: "Low-value transactions where consumers traditionally rely on cash are the next frontier for debit cards. By breaking cost barriers and creating a simple alternative to cash, we're generating a win-win situation for banks, consumers and merchants."
The rise in use of the Oyster card in London proves that Britons are open to the idea of wave and pay. By 2004 27% of weekday Underground journeys and 18% of weekday bus journeys were made using an Oyster card, and last year Transport for London announced it was pushing ahead with a scheme that could see commuters in the capital use their Oyster smart cards to buy goods and services at c-stores and other locations.
While it hasn't taken off as yet, a spokesman for Transport for London says: "We invited companies to tell us how we could adapt Oyster for pay-as-you-go on low-cost items, but after a thorough examination it's not economical for us to progress at this time. We're continuing to look at alternative ways to link e-money with Oyster, but it needs to be of benefit to our passengers and provide revenue that can be invested back into the transport network."
Card use on the up
Behind the prospect of wave and pay lies a continuing growth in the use of credit and debit cards. Use of debit cards grew by 9% in 2005, while cash use slumped by 4%, according to Visa's research. And research by the Halifax claims that by 2008, the volume of payments made by plastic is expected to reach more than seven billion, compared with 4.8 billion in 2002.
In the past decade the proportion of payment by cash has fallen from 74% to 63% and Visa's research suggests that in eight years fewer than half of all payments will be made by cash.
"We are seeing growth in plastic right across Europe - turnover from debit cards has overtaken cash and we can only see that gap widening," says Visa's Pocock. "Consumers want speed and convenience, both in payment and shopping experience, and they want to be flexible and spontaneous in their shopping. What's key to consumers is that they have peace of mind in that payment. People are less comfortable carrying cash around."
Cards have evidently outstripped cheque use, too. Figures from APACS show that cheque usage is declining at a rate of about 8% each year. "Retailers have realised that cheques are very costly to them and slow," says Pocock. "We've seen a number of retailers saying no to cheques altogether, most notably Shell in September 2005. Consumers' love affair with cash and cheques is waning fast."
Another development has been in prepaid cards that allow consumers to load up the card with cash and spend only up to amount. The cards are hugely popular in the US, and there are currently 3.5 million Visa prepaid cards in circulation in Europe, mostly in Italy, according to the company.
"We've seen phenomenal growth in prepay cards, and we're putting lots of creative thought into card design - such as our denim-feel cards," says Pocock. "Prepay cards are ideal for kids."
Last autumn Mastercard launched the Cashplus prepaid card. Shoppers don't need a bank account or to undergo a credit check, and the card isn't visibly branded as a prepaid product. The card costs £9.95 and consumers can choose between paying a monthly subscription of £4.95, or £1 per transaction.
Payment card provider Bluecorner, meanwhile, has been targeting teens with its prepaid cash cards. It has developed co-branded cards with Mastercard and EMAP, consumer magazine publisher of teen titles such as Bliss and Smash Hits. Like Cashplus, these are
not credit cards and are not connected
to any bank account. They have no age restriction and no credit checking requirement, making them ideal for
teenagers.
What's to become of cash?
So with card use on the rise and the prospect of contactless payment, what does the future hold for cash? According to Russell Carter, head of cash at Alliance & Leicester Commercial Bank, consumers and retailers are still just as keen on the hard stuff. "The death of cash is one of the big myths of our times; it just doesn't ring true," he says.
"When shoppers head to the tills, our research shows that a whopping seven out of 10 consumers prefer to pay in cash. They tell us that the humble coin and note come into their own when consumers try to manage their money. Of those who favour cash, 42% say it helps them keep a closer eye on their finances and a third reveal that carrying cash makes them feel more 'in control'."
Carter adds that cash also makes sense to retailers. "We know that more than four out of 10 retailers cite cash as their preferred payment method. More than one in seven retailers say the end of cash would have a disastrous effect on their business, while a further quarter say they would have to make significant changes to their stores."
Carter maintains that cash is more desirable to small businesses because of cost implications. "Half think that cash is both cheaper and easier to manage than other transactions. A further 40% say that the cost of processing cheques and credit cards is just too high."
While Carter is convinced about the future of cash, he admits that retailers aren't all getting the best deal from their bank for cash handling. "Collectively, the country's small businesses could claw back more than £75m on cash transactions alone if they shop around for lower charges," he claims. "For example, the average small to medium-sized enterprise spends more than £450 on cash transactions each year when they could be paying less than £150.
"For many retailers, shopping around for the best cash handling charges can make a big difference to the bottom line," he adds.
Greg Twitcher, vice-president of
relationship management at Visa Europe, says: "Our argument has always been 'What is the true cost of cash?'. There's a security issue with cash and cash handling costs. There's a risk of holding too much cash and the advantage of cash back is that it gets cash out of the tills. If you get a fake note you're not reimbursed. Staff mistakes and theft are also a consideration - but that's not a problem with cards."
And Pocock adds: "I'm not going to make any predictions as to the end of cash, but every year we see a growth in cards, cheque-use goes down, and cash is seeing a reduction. I don't expect us to live in a cashless society, but we can reduce the amount of cash used. The convenience market is realising the cost of cash and cheques and the convenience of plastic. The increase in transaction value that cards brings is balancing out the merchant fees."
A nation of queuers
Britons' tolerance for queuing seems to be waning. Visa's 'Understanding Everyday' research shows that more than half of adults in the UK are more impatient now than ever before.
The findings reveal that:
? 70% of people will walk out of a shop if the queue is too long
? 76% take advantage of late-night and 24-hour openings at supermarkets
? 43% use self-service checkouts to speed up their shopping experience
? Nearly two-thirds of people use their local shops because of shorter queues
? 37% avoid shops altogether by doing their shopping online
? On average people start to get seriously annoyed after 13 minutes
in a queue
? 10% of adults become seriously annoyed the moment they are in a queue.
Irritated customers may look to take their custom elsewhere if they start to associate a particular store with queuing and slow service, warns the Visa report. By the time they reach the front of the queue they may be more aggressive or rude, which impacts on staff morale.
The research also points out that emerging technologies are having a significant impact on this issue, with a recent survey into retailers' attitudes to Chip and PIN showing that 62% of retailers find that Chip and PIN transaction times are faster.
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