Contactless Payment Processing in Canada

Contactless Payments

Payment processing has seen some major advances over the last few years.  Long gone are the days of the old imprinter and the manual slips… the days where you would call your Acquirer to do a transaction trace and they would say, “Ok… we’ll call you back in three weeks with the information” because some poor soul had to then go to a room filled with bags of transaction slips and manually sort through to find your transaction.  We now see mobile terminals and Bluetooth units that get brought to the customer for added convenience.  But there is one phenomenon that seems to have taken over the Eastern part of the world that seems to be struggling here in North America. Contactless payments.

In Asia and parts of Europe, contactless transactions are the norm and have been for many years.  In fact, contactless is almost ancient in those parts as they have well moved onto mobile payments and using their mobile smart phones as their payment vehicle instead of taking out a credit or debit card.  So why is North America still so hesitant to adopt this form of payment?

Partly to blame could be a failed product launch on the part of MasterCard.  MasterCard was the first in the country to introduce their contactless product, Paypass. Their strategy was to introduce it in a few major merchants, merchants that they thought would be category drivers and let the rest fall into place.  They chose a major coffee chain, a national gas station chain, a move theatre and a handful of retailers.  They mass issued the cards and flooded the market with Paypass enabled cards.  However, they did a poor job on advertising and educating the consumer base.  So the reality is, if you don’t know your card is contactless enabled, you’re not very likely to use it.  And if you’re not a regular at the key merchants Paypass was enabled, you’re even less like to even know the option exists.  So unfortunately, the rest did not fall in the place they had hoped and 5 years later, these are still really the only merchants who have Paypass enabled.

And then Visa came along with their PayWave product.  And while they took some cues from MasterCard, they clearly didn’t take the important cues.  They did some advertising but not a lot and they barely issued any cards.  But they were plagued with some technical issues as well.  Turns out, the first generation contactless readers, the ones that were currently in the market, didn’t have enough juice in it to also support the Visa product.  So in order for a merchant to accept both Paypass and Paywave, they would have to upgrade their contactless reader.  A project likely cost thousands of dollars and at the return that these merchants were seeing for offering contactless, it hardly seem like a worthwhile project considering there were other projects (like EMV) that needed to take priority.

And now Interac is poised to launch their contactless product, Flash.  There’s a lot of buzz about this product in the marketplace.  This will be the first time a consumer will be able to pay for a transaction on their debit card without having to enter a PIN.  And after years of educating consumers that your PIN is sacred and absolutely required to ensure security, it’s no doubt that INTERAC is poised for an uphill battle to introduce this product and change consumer behaviour.  But will they take the cues left by their unsuccessful predecessors and successfully launch a contactless product?  Only time will tell… and it’s doubtful with the way things move in this industry, that we’ll have to wait too long to see the results.

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Matthew Hunt has been helping small businesses get set-up with Canadian Merchant Account Services since 2007 and helped 1000's do so. Join Matthew on Google+.

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