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Oyster wallet sponsorship could be a catalyst

March 20, 2011 by Dominic Hirsch — manager, Retail Banking Research

Transport for London (TfL) has announced details of an arrangement with MasterCard, giving the card scheme exclusive branding rights for Oyster card wallets in the UK – these are the plastic wallets distributed with new cards, not the cards themselves.

It is tempting to underplay the significance of this announcement – it is certainly true that the agreement is in essence just a marketing deal to raise awareness of MasterCard’s PayPass contactless payment solutions, and does not signify any ability for consumers to actually use PayPass on the London transport network. 

Far-fetched as it may sound however, this agreement could well be the first step towards contactless cards taking off in the UK – something which has been painfully slow to date. 

TfL has been in discussions with the international card schemes for some time, developing plans to enable commuters to use contactless debit and credit cards to pay for travel as early as 2012 – i.e. in time for the London Olympics. Such cards would not replace the existing Oyster card system but be accepted alongside it. MasterCard’s sponsorship will raise awareness of the technology before it is implemented. 

While acceptance of contactless debit and credit cards would initially benefit people without Oyster cards, including the majority of visitors to London, an increasing number of existing Oyster cardholders will question why they still need their Oyster cards. Issuers will quickly find they have no choice but to include contactless on all their cards, and once contactless cardholding becomes widespread, many more merchants will be inclined to deploy contactless card acceptance terminals. 

There will of course be some customers who will prefer to stick with their existing Oyster cards for a variety of reasons, such as greater control of spending, or separating travel costs from other expenditure, but opening up the transport network to accept open loop contactless cards will almost certainly create the critical mass to kick-start contactless payments in the UK. Similar scenarios are likely to play out in other countries. 

Perhaps it is not so far-fetched that an innocuous sponsorship deal could be the catalyst the contactless cards industry has been waiting for.

Reprinted from Banking Automation Bulletin (see www.rbrlondon.com/bulletin for more information)

About Dominic Hirsch

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