Published on Thursday, February 28, 2008
You know the term cash is king? Well, we might want to rethink that.
Today, plastic seems to reign supreme. Consumers – especially younger ones – are ditching cash and checks in favor of debit and credit cards. And now there’s yet another option for their plastic preference – contactless.
Launched in 2005, contactless payment cards feature an embedded chip using radio frequency identification (RFID) technology. This feature allows cardholders to pay for goods and services by waving or tapping their payment cards or other payment device such as a phone or key fob at a point-of-sale terminal reader rather than swiping, inserting or handing it to a clerk for swiping through a reader.
The transfer of payment information from card to reader occurs only at one to two inches. The contactless feature dynamically generates a unique numeric code with each contactless transaction, similar to a watermark that’s difficult to forge. All other aspects of a contactless transaction are handled just as any other card transaction.
If you’re a retailer, you likely already offer your customers the convenience of paying with credit. It might be time to consider installing a contactless card reader at your business.
A survey by Visa revealed that 60 percent of Generation "P" (for plastic) consumers ages 18-25 prefer using cards for purchases less than $25. According to the survey, they use their cards most for gas and at fast-food outlets and convenience stores. They also used their cards at movie theaters, drugstores and to pay for video rentals, dry cleaning and parking.
It used to be you only brought out the credit card in case of an emergency or to purchase high-ticket items. With the introduction of debit cards, reward programs and the ability to track spending online, consumers now use their cards to pay for goods ranging from a new couch to a pack of gum.
As the amount of small-dollar transactions rise, contactless payments help increase the volume of credit transactions, especially for traditional cash-only retailers. The transaction process is quicker, generally no signature is required for transactions $25 and under, and customer keeps their cards in hand at all times.
The contactless solution is ideal for businesses that have high volumes of sales and depend on the speed of transactions. Typically, this includes quick-service businesses such as gas stations, convenience stores, coffee shops, bakeries and fast-food restaurants.
When considering this technology, it is important to take a look at your customer base. Are college students frequent customers? Do you serve a lot of young professionals? Do your customers never seem to carry cash or very little of it? Contactless might be right for you. It can speed up and increase your transactions. Also, using contactless helps reduce the amount of cash your employees handle.
Many contactless card readers can be attached to current credit card processing terminals with just a few updates. They can either sit on a countertop or be mounted on a drive-through window.
Contactless payments are the future that is here today. As a business owner you have the opportunity to offer your customers the payment options they prefer. Talk to your financial services provider today about options for your business.
Contact Kevin Heath, a Wells Fargo Business Banking manager, at Kevin.d.heath@wellsfargo.com or (520) 792-5352.
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