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Home Depot, Best Buy In Contactless Interchange Fee Showdown
First, Home Depot isn’t paying any hard dollars for the deployment, with Ingenico paying for much of the hardware and MasterCard “making a bunch of money available to Home Depot to do PayPass. That drove the whole deal,” said one official familiar with the arrangements.
Another official involved was more blunt and he put the deal into a broader context. “Every retailer is fairly pissed about the interchange fees, but the interchange fee is one that everyone has been dealing with and they will reach some type of resolution,” said the source. “But at the end of the day, that doesn’t mean that you stop looking at technologies that are appropriate. If it was a big outlay for Home Depot, I would seriously doubt that they would have done it.”
It’s hardly news that contactless payment hasn’t exactly had a bump-free existence, with even some recent endorsements—such as this one from Subway about a Canadian contactless trial–having a very lukewarm quality.
The Home Depot deployment is another good example. On the one hand, this isn’t a trial. Home Depot is making the unusual move of bypassing a trial and immediately deploying contactless across its entire chain. But people close to the deal have gone out of their way to stress that this should not be interpreted as a strong endorsement of contactless payment.
Home Depot corporate would not comment on next month’s deployment, beyond issuing a short statement Wednesday (July 15) that “The Home Depot routinely reviews and tests new technology in our stores to make the shopping and checkout experience more convenient for our customers.” Paula Drake, from the Home Depot corporate communications department, added helpfully: “Other than (what is in that statement), I decline to comment on any specifics.”
The concerns that many retailers have expressed—beyond the card fee issues—is the lack of a substantial value-add for the cards. Contactless vendors tout the cards as more convenient and faster, but consumers have been—for the most part—unimpressed with the convenience difference between taking a card out of their wallet and swiping it and taking a card out of their wallet and tapping or waving it. Even to the extent that there is a convenience boost, that only makes money for retailers if it accelerates lines to such an extent that it can cram in more sales. And then even if that happens, it still needs to overcome any increased processing fees.
-Marc
July 16th, 2009 at 10:14 am
The biggest challenge with contactless in today’s retail environment is that all of the different players involved: Customers, Merchants, Acquirers, Associations, Hardware Manufacturers, etc. all have different motivations for wanting contactless implemented, and those motivations aren’t in alignment.
Just like in the commercials when everything comes to a halt in the store when someone uses cash or check, Visa and Mastercard are motivated by the “Cash is Bad” mantra. The more you use electronic payments, the more money we (Associations) make. If contactless cards can get one-tenth of one percent of cash payments turned to electronic, then it is good for them.
The merchants are looking to enhance speed and improve brand loyalty. The lack of acceptance by the customers are causing those benefits not to materialize. Worse yet, the few customers that are using the technology are causing the merchants to pay higher fees, so they actually hurt the business.
As far as the customers go, I personally don’t think we will see widespread adoption until NFC, or a competing standard, becomes commonplace. Since the carriers, device manufacturers and associations can’t get their act together on who is going to get paid in an NFC world, I’d personally like to see a bluetooth solution created (Thank you Apple and Google) that does an end-run around NFC.
July 24th, 2009 at 10:57 am
For non-micropayments, the contactless card still needs a signature, which is what takes the time. Plus, payment processing is rarely the bottleneck in retail lane throughput. There is no business case for the retailer and its a gimmick for the consumer and yet another clever mechanism for the associations to raise interchange.
July 26th, 2009 at 11:55 am
I find it interesting how these companies are each going about implementing the contactless based system. I wonder how the hackers are going to react to this actually.
Will we see an updated security for those making a purchase.