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Tesco Looks at NFC and Contactless ‘Intensively’ but Remains in Wait-and-See Mode

While giant UK retailer Tesco is following NFC and contactless payment “intensively” and continues to trial contactless acceptance in more than 30 stores, it has not yet committed to rolling out the technology, in part because of security concerns among customers, said one of Tesco’s mobile chiefs.

Frans Falize, international director of dotcom for Tesco PLC, ranked as the third largest retailer worldwide by revenue, said the company is still trialing acceptance of contactless cards and potentially NFC phones running Visa payWave and MasterCard PayPass applications in a total of 34 stores in the UK. The merchant launched the trial in its first stores a couple of years ago.

“The judges are still out on this from our end,” said Falize, speaking at the recent EFMA 2012 mobile and advanced payments conference in Paris. “So NFC, we’re still waiting to see how it develops. But clearly, it’s something we are fairly interested in, following intensively and trialing in certain stores to understand how we can make it better for our customers.”

Tesco, the UK’s largest merchant, is remaining in wait-and-see mode, according to Falize, despite signs that some other tier-one merchants are finally starting to get onboard with the contactless payment rollout in the UK. The country is home to Europe’s largest bank payment contactless rollout, with more than 140,000-enabled point-of-sale terminals deployed.

Watching Security Concerns
Falize said that among the key factors Tesco is evaluating before rolling out the technology are security concerns among consumers.

“Security is the key word that we shouldn’t underestimate,” he said. “Customers are nervous having that information on the phone. I think if you ask the airlines what is left behind most of the time, it’s mobile phones, and I think iPads are second.”

He suggested that banks and other payments service providers show their customers that mobile payment technology, including NFC, is secure if they want them to use the services. “Why would you expect them to use your service if you can’t guarantee it? And if you are not prepared to offer that service and others will, I think you will lose customers.”

Falize, in response to a question from NFC Times, noted that Tesco only discontinued acceptance of checks a year ago and does not intend to “blindly follow” the market in rolling out acceptance of contactless and NFC or other technologies. Tesco, mainly a supermarket chain, has more than 3,000 stores in the UK under its various formats.

“That is a massive difference from still traditionally taking checks to go to NFC,” he said. “So, we’re open to it. We’re adopting it. We’re trialing it. We are talking to customers about it. And we recognized that technology goes so fast that maybe in a year’s time, NFC might be old-fashioned, and we don’t want to use it anymore. So we want to be careful about that.”

Among tier-one UK merchants that have taken the contactless plunge in the UK are McDonald’s, Starbucks and, more recently, Marks & Spencer. The UK Post Office is also rolling out contactless to more than 11,000 branches and Transport for London plans to enable users to tap to pay directly for fares on more than 8,500 buses. At present, most locations accepting contactless in the UK are part of smaller merchants, however.

When Falize referred to NFC, he was generally including acceptance for contactless cards in the term. He didn’t mention any plans for tag-based NFC applications, such as smart posters that could deliver coupons or other promotions.

His presentation focused, in general, on Tesco’s mobile initiatives, including its “virtual store” demonstration project, which enabled users at some transit hubs in South Korea and at Gatwick Airport near London to shop using QR codes. He also discussed the retailer’s new Tesco Discover app for Android and Apple devices, which uses augmented reality to enable users to browse and shop remotely, such as while they hold their phones up to a Tesco Discover icon in a print publication.

QR Codes Not Taking Off
Falize said the virtual shop, launched in August 2011 in a subway station and 10 busy bus stops in Seoul, South Korea, resulted in a 130% increase in online sales compared with how much the same South Korean registered users purchased on average from Tesco’s Web site. The stations had images of products, and shoppers could find out more about them and buy using QR codes.

But when asked by the moderator whether he thought a lot of people were using QR codes and were becoming comfortable launching content on their mobile phones with the 2-D bar codes, Falize responded, “not really.”

“I don’t think it’s taking off, and I don’t think it will take off,” he said. “I think the (other) technology will overtake QR Codes.”

He didn’t say what other technology he had in mind, but said Tesco was “open for all the new technology.”

Another speaker at the conference, Andres Wolberg-Stok, global mobile and tablet banking director for U.S.-based Citigroup, also expressed doubts that QR codes would take off.

“I think there is a fundamental hurdle for people to overcome getting QR codes,” he said. “I think the value to QR codes is just representationally and positionally saying, ‘we are a company that cares about digital,’ ” Wolberg-Stok said.

Apple Holding Back on NFC Like Tesco?
Falize also seemed to say that Apple’s decision not to adopt NFC in the iPhone 5 was similar to Tesco’s wait-and-see approach with the technology.

Besides its augmented reality app and other apps for Apple portable devices, Tesco’s grocery app contributed 12% to traffic on the tesco.com Web site last year, Falize noted.

“I think Apple made actually quite a good move not doing that (with NFC) because, as one of the speakers quite rightly said, we change our mobile phone every year, every two years,” said Falize, responding to a question.

“NFC is still early days, so there’s nothing wrong with holding back, see how it develops and then offer it maybe next year or the year after in their next release,” he said. “And I think, personally, that’s what’s going to happen, so they hold back, they’re introducing their own systems, as well, just to see what’s going to work best. But I’m sure if it takes off, the next iPhone will have NFC.”

 

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