A recent issue of RFID Journal discussed contactless payment terminal deployments in North America. The article discussed Best Buy suspending its national deployment of contactless terminal over its disagreement with Visa on how debit cards were processed.
To help understand the issue, let me elaborate with an example. You buy a LCD TV for $500 at Best Buy and choose to pay with your debit card. If you used your magstripe debit card, you would swipe the card, enter your PIN and head home to enjoy your TV. Best Buy would pay about $1 as fees for accepting the card.
Let's look at the scenario where Best Buy has deployed a contactless reader and you whip out your fancy contactless debit card to pay for the LCD TV. You authorize $500 to be debited from your account by providing your PIN and you leave happy. Best Buy would pay about $11 as fees, an extra 1000% for the mistake of deploying contactless readers.
Now you know why Best Buy pulled out these readers. The question is, why did they not pull the readers out earlier. Last I heard, their losses were in 7 digits due to the way contactless PIN Debit transactions were processed by Visa Interlink.
It might be worthwhile to discuss another dimension of deployment of contactless readers here. Visa and MasterCard have positioned contactless payments as an option when speed and convenience are of the essence [for transactions less than $25]. You are at a Coffee Shop. You 'wave' your card to pay the $3 for your caffeine fix and run. No need to sign, no PIN necessary, no receipt. Makes sense. However, for users to get used to waving their cards at readers, these readers need to every where. Otherwise, its one more decision point (and aggravation) for the user to figure out whether they swipe, wave or insert their card. Consequently, Best Buy, Home Depot and other retailers deploying contactless readers are getting us to the critical mass where you can 'wave' whereever we pay. Interchange rules that are currently geared towards speed and convenience need to modified to accommodate ubiquity as well. One hopes that this change will come soon so that Best Buy can go back to having nationwide deployment of contactless readers. I have to say that I enjoyed waving my card at Best Buy readers. Sigh!
[Updated 07Jan2010]: Wanted to inform readers that Best Buys has stopped accepting Visa contactless cards (source).
What do you think?