From October 13th all contactless Visa card transactions will require authorisation. American Express will be introducing a similar change on 1st October.
Currently most contactless transactions are approved by the terminal offline, so we are used to tapping, hearing the ‘ping’ and leaving with our goods.
What are the cost and risk implications?
Transaction cost:
For many merchants your card acquirer will be charging for each authorisation. So, as contactless has become such a success, the change will increase your transaction costs.
Potential loss on declined transactions:
Consumers have assumed that hearing the ‘ping’ means that they have paid, so will leave the counter with their goods. In fact the ‘ping’ is a card read notification, so authorisation of the transaction may take up to a couple of seconds after this.
Retailers, fast food chains and bars will need to take care to retain the goods until they see the authorisation confirmed on the terminal or till. Otherwise consumers may, often in all innocence, have left the premises without paying.
Mitigating the downsides of the change:
Consumers are likely to take time to adjust to the new experience, and have a tendency to blame the retailer rather than the card companies when they are inconvenienced.
Training of staff in both holding goods until approval and holding brief conversations to make these extra seconds positive for the business and customer is suggested.
Whilst authorisations may take only split seconds in some cases, where internal or external communications systems are not robust, the delay may be longer.
For high footfall retail, food outlets and bars consideration should be given to assessing whether the current terminal fleet is sufficient to avoid queues during peak hours. For example, coffee drinkers are notoriously impatient when faced by queues at the counter as they head to work.
Authorisation costs charged by acquirers often include an element of margin. A discussion on how the acquirer can share some of the impact of the cost increase may be worthwhile.
Summary
Slowing contactless transactions by requiring authorisations will be annoying at first. It is likely to be a short term irritant however. The long term impact is likely to be more charges for electronic authorisations, another instance of the rising cost of doing business. ERA’s Payment professionals reduce costs and maximise revenue through optimising payment solutions.
Please contact us for more information.
Article by: Paul Davidson