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Why Contactless POS is Ready for Retail Deployment

Developments in contactless payment technology are generating renewed interest, and now suggest that the point-of-sale (POS) payment systems that adopt this capability may finally be ready for mainstream deployment.

The introduction of Google Wallet, and the expectation that several new NFC-enabled smartphones will reach consumer markets soon, have created a sense of optimism.

According to the latest market study by ABI Research, in 2010 only about 10 percent of total POS terminal shipments included some form of contactless technology.

While ABI doesn't agree with some of the wilder predictions for contactless POS growth -- for example that within 12 months, one third of all terminals in the U.S. will accept contactless payments -- it does forecast that 85 percent of terminals shipped worldwide will be contactless-enabled in 2016.

That growth will be driven by increased proliferation of contactless cards and especially, rapid adoption of NFC-enabled cell phones. Craig Foster, senior analyst at ABI says, "Contactless has the potential to change the way we pay for goods completely, significantly reducing time spent queuing at the point of sale. It also represents an almost perfect fit for the vending industry."

There are two key benefits: the increased speed and simplicity of check-out go hand-in-hand with the very essence of the vending machine -- to provide goods quickly and conveniently; The fact that small-value transactions -- typically under $25 in the U.S. market -- do not need to be authenticated by signature or PIN entry is very appealing to vending machine operators.

Contactless technology is also in the very early stages of adoption in ATMs: rather than inserting the card, a customer waves it in front of the machine and enters a PIN.

Ingenico, VeriFone, and Hypercom are the three leading vendors of POS terminals. Contactless terminals have formed an increasingly significant part of Ingenico's product portfolio in recent years, accounting for a claimed 21 percent of the company's shipments in 2010.

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