London Sticks Its Toe In The Contactless Payment Waters

In mid-September, London will launch its first large-scale contactless payment trial, with some 2,000 retailers slated to participate.

Although Europe has more aggressively embraced various wireless technologies than the U.S., it has sharply lagged the U.S.?and certainly parts of Asia?with contactless payment.

?As in many major cities across Europe, millions of people across in London use contactless ticketing on public transport. However, when it comes to contactless payments, challenges remain with regard to business models and partnerships," said Jonathan Collins, an RFID senior analyst with ABI Research. "Before many European retailers commit to upgrading their POS terminals to accept contactless, they will need to be convinced that the investment is in their interests. Early European rollouts, combined with experience of advanced deployments around the world, will be key.?

Next month's trial is being coordinated with eight leading U.K. banks?including Barclays and the Bank of Scotland--but it's not clear which retailers will cooperate, Collins said. "There are still discussions about which (merchants) will come on board," he said.

As in the U.S., the key draw for retailers is speed and the theoretical ability to process more sales in the same amount of time. The attraction for the banks, though, is even simple: They want to move a lot of small-currency transactions?typically paid for with cash, thus avoiding any credit- or debit-card fees?to plastic. The merchant challenge: can the additional revenue exceed the additional card fees enough to make it worth the cost of the technology changes? In London, that's what will actually be on trial.

Security fears also will be playing a role in the London experiment, but not for consumers nearly as much as for the banks, which have agreed to cover any fraudulent losses, Collins said. To minimize risk, the trial will have impose a 10-pound (about $19.87 U.S.) spending limit for the contactless cards.