RFID set to revolutionise retail payments
- Posted:
- 16:40 14 Mar 2005
Contactless payments and radio
frequency identification technology will transform the way people
pay for goods, shop from home and identify themselves at
work
Radio frequency identification tags and contactless payment cards
will transform the UK payments market, according to Dave Birch,
director of ITconsultancy Consult Hyperion.
A growing number of retailers and manufacturers have rolled out
RFID tags across their supply chains, but Birch predicted that RFID
chips would be embedded or attached to debit cards, mobile phones
or key rings and used to make payments.
Banks and retailers have also introduced chip and Pin cards in a
£1.1bn initiative to cut card fraud by 60%.
"It would be wrong to see the development of chip and Pin as the
retail e-payment technology development of the year. RFID is
absolutely the next evolution of retail payments," said
Birch.
Card providers, including Mastercard, Visa and American Express,
are developing contactless payment cards that incorporate an RFID
chip and authorise payments when the card is waved near a terminal.
The payment is cleared in the same way as a normal
transaction.
MasterCard's RFIDchip card is similar to the Oyster smartcard used
on the London Underground. The card has embedded RFID technology
that interacts with a terminal to allow customers to pay for
journeys.
"Consumers like contactless payment cards such as Oyster because
they are convenient. Merchants like them because they are quick,"
said Birch.
He added that smartcards such as Oyster can be used for low-value
payments other than train journeys, such as buying a coffee or
paying for car parking.
However, companies would generally use RFID chips and smartcards to
prove employees' identity rather than making payments, said
Birch.
"An employee's mobile phone might have an RFID interface, which
they could hold up to an RFID reader at the company entrance to be
let in," he said.
Another trend in the payments market is the introduction of
smartcard slots in TV set-top boxes. For instance, satellite
broadcaster BSkyB has announced plans to launch a credit card in
partnership with Barclaycard. The card will be inserted into a slot
in Sky's digital set-top boxes to enable users to make purchases
from their TV.
"The technology opens up a wealth of opportunities and is sure to
make banks, retailers and broadcasters sit up and pay attention,"
said Birch.
Electronic purses have also made a comeback, despite the failure of
Mondex, a pre-pay scheme trailed in Swindon in the 1990s.
Visa USA has estimated that the market for pre-paid cards, which
are topped-up by the card-holder, is worth about £1tn, said
Birch. The market spans gift cards, coffee shop cards and
government benefit cards.
Hong Kong's pioneering smartcard
In Hong Kong, millions of transactions are made every day on the
trailblazing Octopus smartcard. Of these transactions, which are
worth about £4m a day, 15% by value are made at retail
locations, according to recent figures.
The Octopus smartcard, launched in 1997, is widely viewed as one of
the most successful commercial uses of smartcard technology.
Introduced as a fare collection device for the city's transport
systems, there are now about seven to nine million cards in
circulation. In addition to the subway, the cards can be used as an
alternative to cash in phone booths, vending machines and snack
bars.
Travellers can load cash onto the cards at convenience stores or in
stations. Cardholders under 18 years of age can choose to have
their Octopus card in the form of a watch.
The Octopus mass transit smartcard has spawned imitations at
underground systems around the world, including the London Oyster
card.
The Octopus smartcard uses RFID technology to allow customers to
hold their cards near card readers, rather than inserting the card.
Because the Octopus system was developed in 1997 - long before any
standards for RFID - it uses a proprietary form of RFID.
Stations use local area networks to pass transactions from Octopus
terminals and related systems.
The type of wireless technology pioneered by the Octopus scheme is
being developed by mobile operators including Motorola, Nokia and
Samsung Electronics. The companies are adding "near field
technology" to their phones to make payments, identify the owner or
download digital files from a PC.