Over the past year PYMNTS.com has built a community of payments experts, enthusiasts and curious minds. We often turn to our community for both questions and answers that plague the payments ecosystem. We have compiled a list of some of the responses we have received from this week's Ask The Industry. We welcome any feedback in response to these answers and encourage community involvement.

Question: What is the biggest reason why contactless payment cards are not moving further along?

"I believe contactless slow growth is due to two mayor factors driving a successful payment product, namely acceptance and interchange.

Acceptance - There are to few terminals accepting contactless cards, thus for issuers there is little reason to pay the extra money to provide contactless cards. Besides awareness, as mentioned For cardholders, there is not enough places to use the contactless functionality (it lacks ubiquity), and thus end up having to ask: "can I tap to pay here" for every purchase... after the card being rejected by a few merchants the cardholder gets fed up with trying to use the contactless interface, and abandon using it. In the payments industry this is often referred to as the "Chicken and Egg Problem", or perhaps David S. Evans has nailed it down more accurately as "Payments is like Dating", referring to the fact that there is no date unless both partners shows up for the date (http://www.pymnts.com/why-every-payments-product-needs-an-ignition-strategy/).

Interchange - Contactless is positioned for low value transactions, and is intended to replace cash for low value transactions. Interchange is however typically made up of a fixed cost per transaction and percentage of the purchase amount; on low value transactions the fixed amount eats a lot of merchant revenue per transaction, while cash does not have a per transaction fixed processing cost. The cost to process a low value card transaction is the same as a regular card transaction, so there will always be a minimum fixed cost component for card transactions. The solution to the interchange problem lies in reducing fixed processing costs (think offline transactions) and special low value transaction interchange categories." Wynard Vermeulen

-----

"The reason is simple: The cost to the card acceptor of adopting a new card acceptance technology alongside the existing magnetic stripe and chip technologies that it has adopted versus the benefit in terms of new business from a technology that has not yet become ubiquitous.

The benefit just isn't there yet." Scott

-----

"Like all new payments systems, merchants/customers acceptance is the chicken/egg problem. People and merchants don't see the need for one more thing to keep track of and one more device in their store. There is probably a certain fear factor as well, since these transactions are even a bit more ethereal than existing electronic payments. We saw the same phenomenon in Atlanta with the 1996 Visa Olympic chip card pilot." Jim

-----

"I think the single largest obstacle to contactless payment cards not being adopted is the perception on lack of security. Until the industry can prove without any perceived doubt that contactless payment methods are safe and secure, the public as a whole will shy away from them." Kevin

-----

"I think all of the above comments are good and all of these reasons are contributing to slow adoption. From a mostly US perspective, there aren't that many contactless cards issued and there aren't that many merchant locations that accept contactless. Again, from a US perspective there has also been quite a bit of research showing that contactless isn't as secure as it should be. I think most of those issues have been addressed, but it will take time to get over some of the bad PR.

It seems very likely that card issuers are going to be left behind and a new set of payment instruments (cell phones with NFC for example) are more likely to capture the contactless payment space." Marc Massar

-----

"Contactless payment cards were launched in the US with PayPass and now PayWave. In the meantime the Mobile industry pushed to include these services in their NFC offer. The result being that the biggest issuers are 'on hold' until the format battle (Handset vs. Card) is resolved. I am in the middle of a couple of these 'battles' at the moment" Waqar Qureshi

-----

"The merchants ha, and bottomline, somebodyhas to pay for the equipment to support the program. The issuing banks need to get the cards into the marketplace. I did a test for Subway four years ago in Mahattan in conjunction with MasterCard and Vivotech, it would have it would have gone have gone real well, if the cards were issued!" Michael Slominski

-----

Click here for more answers