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Near Field Communication and all contactless technology

BARCELONA – Retailers would be able to accept bank-card payment through their iPhones–including contactless payment–under a new service big UK card issuer and acquirer Barclaycard plans to trial.

The device, which basically attaches a chip-and-PIN card reader to the back of the iPhone and combines it with a downloadable app, is targeted mainly at small, mobile merchants, such as plumbers, electricians, delivery persons and hairdressers who make house calls.

In all, there are about half a million small- to medium-sized merchants in the UK, many of whom do not accept cards, and in fewer than 10 years will no longer be able to accept checks, Dan Salmons, director of payment innovations for Barclaycard, told NFC Times. Salmons announced the mini-POS terminal this week during a presentation at the Mobile World Congress in Barcelona.

“The question is, what replaces it?” he told NFC Times. “How do businesses take payment? It’s one of the ways you can replace those remaining checks where customers have no easy way to take a payment.”

The card payment in the iPhone POS terminal goes over the mobile network for approval, using the same encryption security as for other online transactions, said Salmons. While mobile point-of-sale terminals are available using the mobile network, they are bulky and expensive, he said.

With the iPhone terminal or those expected for other smartphones, the merchant would enter the amount of the transaction on the phone and could also key in promotions, for example, giving consumers a certain discount if they spend over a certain amount over a certain period of time, said John Conlon, senior business development manager for mobile at Barclaycard. The iPhone app offers other features, even a cash-accounting tool.

For most card transactions, consumers would insert their EMV cards into the reader and key in their PINs. But for purchases of £10 (US$15.67) or less, consumers who carry contactless cards could tap them on a contactless reader built into the iPhone attachment. Like contactless transactions at conventional POS terminals, the consumer wouldn’t have to enter a PIN to complete the transaction.

More than likely, any consumer tapping the planned iPhone “Virtual Till” to pay would be carrying a contactless card issued by Barclaycard or its parent, Barclays bank. Together they have issued more than 6 million contactless credit and debit cards since leading the launch of contactless payment in the UK in fall 2007. That’s the vast majority of cards issued in the country.

Barclaycard’s acquiring arm is also signing up merchants to accept contactless payment, although no tier-one retailer has yet installed contactless terminals in the UK throughout its chain.

But when it launches its planned iPhone POS terminal, expected before the end of 2010, many more small merchants may be enabling British consumers to tap to pay.