Interview • 18.01.2012
“NFC is the leading technology for contactless payment“
Interview with Jürgen Schübel, Head of Commerce Development at MasterCard Europe
Credit cards have a hard time in the German retail sector because of their fees. How are costs shaping up?
All this is a question of supply and demand of course. Generally with increasing volumes, costs will also decrease for transactions. In this case we also speak of economies of scale. So the larger the demand, the larger the possible cost reduction.
Why do credit cards strongly increase in German online retail?
Credit cards are an easy, quick and convenient type of payment. If for no other reason, more and more retailers prefer credit card payments because payment with credit card guarantees payment receipt. According to the so-called E-Payment-Barometer, a joint opinion poll by ibi research, the business magazine “Der Handel“ (= retail business) and MasterCard, larger retailers favor purchases with credit cards, since the number of payment defaults are very small. In contrast, for many retailers payment defaults are a part of their daily business for payments made using direct debit; in this instance the retailer bears the risk until the very end. Consumers in turn of course also benefit from a worldwide acceptance of credit cards. Especially in E-Commerce many transactions also happen transnationally. In addition, flexibility and an extended credit period are among the benefits for consumers.
Are credit cards still safe?
Safety is a dynamic process. That’s why we work closely together with banks and regularly educate consumers, because unlike cash which is irrevocably lost in case of theft or loss, customers can freeze their cards- be that debit or credit cards – should it be necessary. Generally credit cards are considered to be one of the safest means of payment, regardless of whether that’s domestically or internationally.
We constantly monitor the development of credit card fraud trends on a global and national level. MasterCard has developed the Expert Monitoring System (EMS) to uncover and avert impending risks based on spending behavior. For secure purchasing on the Internet, MasterCard offers the “SecureCode” security solution. Card holders receive individual authentication data – similar to a PIN for automated teller machines – for online payment processing with which they can verify themselves with their bank without a doubt via a password. In return the bank also verifies itself via an individual announcement.
First TA 7.0, now NFC. Every few years retailers are supposed to invest in new card terminals. What is the benefit of contactless card payment?
Contactless technology is a consistent evolution of the EMV-Standard*. For retailers it represents a process optimization and in addition is connected with low maintenance costs. Card terminals are replaced in regular intervals. Contactless card terminals therefore can be swapped in a regular cycle. This way it also does not necessarily create additional costs for the retailer. Particularly time savings at the checkout is a benefit of contactless payment, for the retailer as well as the consumer.
PayPass is the name of Mastercard’s choice for contactless payment – not just by credit card. Who are the new partners and how are accounts being settled?
For starters, the contactless PayPass payment technology does not depend on the product and thus can be incorporated on a Maestro-debit card or a prepaid card the same way as on a credit card. In addition, contactless payment is not dependent on the “plastic card” form factor. Today there are key fobs or wristwatches already with which one can make contactless purchases, provided that they contain an embedded NFC chip through which contactless payment can be actuated. It doesn’t require any other partners to do this. Settlement of accounts remains the same as before and works via point-of-sale terminals.
What are the advantages of PayPass over the contactless chip card?
The international standard speaks for PayPass. Whether it’s in France at a Carrefour supermarket, at McDonald’s in Switzerland, at Douglas in Germany or in a taxi in New York – PayPass works all over the world and always under the same principle.
Douglas and dm already utilize PayPass. What is their experience?
Since the end of October, contactless payment with PayPass is possible in all 446 Douglas perfumeries as well as in stores by Hussel, Christ, Thalia and Appelrath-Cüpper. Right now it’s too early for a separate valuation. However, we know from other retailers that cashless payment has steadily increased over the past few years and that this doesn’t just benefit consumers but also checkout staff. Demand on the part of retailers and consumers is increasing.
Is PayPass also suited for small amounts like at a bakery or at a convenience store?
PayPass generally is suited for all amounts. PayPass is an access technology and suited for all industry sectors and amounts, because PayPass is available for all types of cards: regardless whether that’s a debit, credit or prepaid card. Since the end of November 2010 you can make contactless purchases in Switzerland in all “k kiosk“,”avec“ and ”P&B“ stores. Since no PIN or signature is required for amounts under 25 Euros, needless to say payment at a convenience store or at a bakery is also ideally suited.
NFC cell phones are barely common yet. However, mobile payments also work with a barcode on the display. It is simply scanned at the checkout. The retailer does not have to invest in a new technology in this case. What do you think about that?
NFC is the leading technology for contactless payment, since it is available at all times between the card and the reading device, i.e. it does not have to be activated as opposed to you having to first generate a barcode on the mobile radio unit for example. That is to say: there is an additional expenditure of time and generally the barcode reader (or scanner) is also not connected to the checkout and the card terminal, respectively, which represents additional expenditure. With regard to speed during the process, NFC therefore represents the better alternative.
And finally an outlook: How will the portion of cashless payment in retail develop over the next five or ten years and what role will credit cards play in it?
The number of credit card payments is continuously increasing. Contactless payment plays a large role in this trend, since every debit, credit or prepaid card can be equipped with contactless technology and thus turns into a contactless card. They are based on the international standards of debit and credit cards. That’s why card payment is an innovation driver.
Studies show that once consumers have made contactless purchases, they appreciate it and more and more frequently reach for their credit card versus their cash. Retailers and consumers show growing interest in contactless payment in equal measure. Thanks to the increasing competition in this area, the portion of cash payments will decrease more strongly than it has up to now.
Interview by René Schellbach, First Publication: EuroCIS.com
* EMV is a joint specification for payment cards by Europay (now MasterCard Europe), MasterCard and Visa.