The key argument of the report is that none of the three groups of companies involved—the card brands, the issuing banks and key retailers—is spending the dollars to create true incentives to make contactless payment work, said lead report author Bruce Cundiff, who is Javelin's director of payments research.
"There is no effective value proposition for merchants and for wireless carriers," Cundiff said.
For example, the most effective way to jumpstart contactless payment would be at the retail level. If retailers were given a strong incentive—such as a significant interchange rate reduction for contactless payment transactions—to push contactless, it would happen. The retailer might even pass on a tiny portion of those savings to its customers, offering them special discounts if they use contactless.
Now the consumers are actively trying to figure out if any of their cards are contactless—many consumers who are carrying contactless cards don't know it--and, if not, some will likely call their banks to ask for them. Those consumer calls to the banks will likely get noticed and will increase production.
But someone has to start that cycle. Without any incentives, retailers have little reason to pay for the POS upgrades. And if they have made those upgrades anyway, they have just as little incentive to push the new payment method. Without retail incentives, fewer consumers will bother. A vicious—but entirely predictable—cycle.
So why won't the banks offer incentives? Chase, for example, has no reason to do so, Cundiff said, because they're thinking, "We're making the same money on these cards regardless of whether they use contactless or magstripe" so why bother?
The bank gets the buzz from offering contactless, without having to really push it. "They don't care how many contactless transactions they get. They pay lip service to it," Cundiff said.
The next move for contactless "will be delayed until the primary players—card networks, financial institutions, mobile carriers, merchants, and handset manufacturers—treat the field as a symbiotic ecosystem rather than an economic battlefield," the report said. "To drive the next phase of adoption of contactless payments, card networks must do something counterintuitive and somewhat risky. They must nurture an environment for merchants to create seemingly competitive products: closedloop gift cards and private-label cards. The card networks' risk is that transaction volume for network-branded products will slip. But the payoff is far greater. It will create a robust contactless infrastructure, hinder the development of products and networks from threatening powerhouses such as PayPal and Google, and spur wireless carriers to push the spread of NFC technology."