Contactless: Fast Lane or Roadblock?

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Beginning last year, Best Buy gradually began to halt acceptance of the Visa payWave contactless card.

The reason given for this change is Visa’s requirement that contactless transactions be processed only via the more expensive signature debit networks rather than via PIN debit. What’s behind this business decision?

Visa says the choice was for tactical reasons: contactless transactions are – by design – supposed to be fast. Adding a PIN-entry requirement would slow the transaction and make contactless virtually on par with a card swipe in terms of the time required to complete a payment.

But Best Buy saw the signature network requirement as burdensome from a transaction cost perspective. It continues to accept payWave using the magnetic stripe for swipe transactions, but it will no longer accept the card as a contactless device.

So, by channelling the transaction to a faster network from the checkout standpoint, has Visa inadvertently created a roadblock for broadened acceptance of a relatively new technology?

The jury is still out, but this is yet another example of a sizable merchant trying to take the drive’s seat in the payments arena. A trend we expect to continue in 2010 (see Javelin’s ’10 Trends that Will Shape Banking, Payments and Security in 2010′ report).