An overview of new research considering the current status and future trends a cashless payment system entails for sport clubs, leagues, major tournaments and venue operators
by Stefan Leibhard and Bernd Ingerling, BTD Group
Over the last decade the concept of a cashless payment system and other solutions based on RFID technology (e.g. access control, ticketing, accreditation, registration system, etc.) have become an integral part of a stadium and arena environment. Nevertheless, despite its broad acceptance and advantages numerous leagues and clubs are still hesitant to introduce such a system. With additional information regarding detailed system descriptions, successful case studies, identification of potential risks and underestimated potentials, decision-makers can be helped to prepare or evaluate their plans and strategies concerning the potential introduction of a cashless payment system.
Value
A current study carried out by Capgemini and The Royal Bank of Scotland (RBS) reby Stefan Leibhard and Bernd Ingerling, BTD Group vealed a trend to show a global growth of non-cash payments which went up by 6.8% (per year) between the periods 2001-09 and in 2010 by a further 7.8%. This research also predicts that the volume of non-cash payments transactions will rise in future years from 14% to a staggering 37% in some regions of the world.
The USA is currently the special report on ticketing & payment October 2012 www.global-identification.com 63 largest non-cash payments market in the world. A study produced by the Federal Reserve System disclosed that the usage of debit cards in the US increased from 2006 to 2009 by 14.8% and by 21.5% for prepaid cards (in the same time-period). This significant increase of transactions with debit and credit cards amounted to a total of 15.6 billion in the US market.
In spite of the worldwide rise of cashless payments, the percentage of cash handling especially for lower amounts (under 25 $) is still fairly high even within mature economies such as the US, UK, Canada, Germany and Australia.
As an example, the payment behavior in Australia which is similar to other developed economies shows that cash is still the most frequent payment method depending on the actual amount and point of purchase.
Sports environment
In Germany, the first cashless solution was implemented by the Veltins Arena in 2001. In the German stadium and arena sector, the cashless payment system is primarily based on contactless RFID technology which has become ever more popular. Currently there are 13 stadiums and multifunctional arenas in Germany’s Bundesliga which have or are already in planning to install such a solution. Moreover, six of eight of the European Championship 2012 venues in Ukraine and Poland provide contactless payment solutions for spectators. The presence of cashless payment solutions in major European leagues, with some exception is still nevertheless in the very early stages.
Specifically from the viewpoint of top sport clubs, venues, operational companies or major sport and leisure events, it is beneficial to implement a solution like the cashless payment system integrated within a multifunctional conception. The goals are to significantly enhance the fan experience and to leverage business potentials through smart technology solutions.
By now there are several sophisticated RFID-orientated implementations on the sports and leisure market. For instance, the famous motorsports complex, the Nurburgring in the German Eifel region is completely operated on the basis of an RFID card. The visitor is not only able to carry out payments anywhere onsite, but also to use the card as an entrance medium to the different attractions including the race course, concessions and funpark.
In the stadium environment there are two examples which illustrate the success and potential an RFID and cashless payment system has. These are the Allianz Arena, home to Bayern Munich & 1860 Munich as well as the Weser Stadion, home to Werder Bremen.
A multifunctional cashless RFID-based solutions have become an integral part of a stadium and arena environment Global Identification – September 2008 64 October 2012 special report on ticketing & Pa yment payment concept does not only apply to a single club or a venue, but additionally as a potential centralized solution where for example, a domestic football league could consider. In Holland and Belgium for example, both leagues already offer a centralized FanCard System and as a result, a multifunctional cashless payment concept could be seamlessly integrated in similar way. A leagues demands naturally require more sophisticated solutions than ones for a single sport site.
This complex conceptual design of a centralized solution however contains various aspects and require intensive research in order to come to a sound judgment and visualization of what is expected: several important factors include the liaising with stakeholders, technical design, legal requirements, broad marketing implication, public image, social factors, etc.
There has been a surge of technological developments during the last decade with the introduction of new business models based on RFID, barcode, NFC (Near Field Communication), the development of e-payment brands (e.g. PayPass, Google Wallet, ISIS, SEQR, LevelUp) in the cashless payment market as well as the establishment of innovative multifunctional concepts e.g. as seen in the Asian market for public transportation, loyalty, payment etc. The improvements specifically of NFC technology and mobile applications open a new perspective not only for stadiums and arenas but also for the overall markets. For instance, replacing or amending a card based solution by a mobile phone based solution offers an extended and efficient multifunctional concept for venues and clubs which might be integrating with functionalities such as payment, ticketing, apps, loyalty, social media channels etc. on just one medium.
RFID
A cashless payment system is designed and installed in stadia to enhance a visitor’s convenience, whilst ideally generating profits for the clubs. Primarily, the system aims to eliminate the notion of fans and visitors paying for food, drinks or merchandise with ‘slower payment possibilities”’ ike cash and instead use for example, RFID cards. Spectators are able to obtain and top up the payment cards onsite from either/both automatic dispensers and/or person operated selling points. Alongside, in many instances venue visitors might charge their cards via online tolls like webtop- up or automatic top-up as well as preload the season or membership cards. So called “open-loop systems” operate on the principle of contactless credit or debit card issued by partner banks of the clubs or venues. In contrast, cards for “closed-loop systems” might be provided and circulated simply by the club, venue or event operator.
The cashless concept is becoming increasingly popular amongst major modern stadia and other sports venues because of its ability to speed up the sales process in a short period of time whilst monitoring the tendencies of the customers.
RFID technology allows contactless transmitting of different data between a RFID tag and compliant reader device. Inside of a tag, an RFID chip is embedded and is able to store a large array of diverse information, which can be securely coded. For this reason, the RFID based technology is deployed to various applications in many industrial and business sectors. The most common field of RFID appliance exists in automatic identification and tracking, however there are also some further means which RFID is used. RFID chips can be found in several card types or other transponders allowing payment processes for common goods at supermarket, highway fees or city transportation tickets. There is however, considerably more functionalities RFID may provide – RFID installations may be found in public transportation ticketing systems, comprehensive access, ticketing and accreditation solutions, item registrations systems, identity check, passport, time registration and many more. With this in mind, it is clear that RFID possesses enormous flexibility, adaptability and expandability.
Considering the above mentioned multifunctional character of the RFID, many companies already offer contactless payment possibilities or extensive solutions and services on the basis of this technology. For example, MasterCard have rolled out their contactless smart card system “Pay- Pass” in 37 countries in terms of testing and launching. In 13 countries the customers can already officially pay at more than 311,000 (March 2011) merchant locations. VISA has been analogically testing and implementing “payWave” in several countries worldwide. A really impressive multifunctional RFID based concept, called “Octopus”, has already been launched 1997 in Hong Kong. Stating as the transportation card Octopus has successfully grown and improves continuously, gradually extending the integration of functionalities like contactless payment with huge amount of acceptance points, access control, registration, reward system and many other schemes.
Other remarkable and comprehensive RFID installations in the Asian Region for a long period are e.g. “T-money” in South Korea, “EasyCard” in Taiwan, both based on Mifare technology, “Suica” in Japan or “EZ-Link Card” in Singapore, both provided with the FeliCa chip.
NFC technology
NFC is often used synonymous with RFID though there are clear differentiators from a technical point of view. Near Field Communication (NFC) is a subset of RFID, which allows a communication channel up to 4 centimeters distance with a 13.56-MHz frequency. Primarily this short range of interface creates a safe connection line between the communicating devices. NFC is usually used in environments that require higher security standards (such as payment) and is therefore used in nearly all short range payment solutions.
A further advantage from NFC is its compatibility with several contactless chip standards which presently exist on the market such as mifare, FeliCa, LEGIC, etc. and the extension of multifunctional capabilities, tions in this mode including payment, registration and unlocking of security mechanisms, access, etc.
- Peer-to-Peer-Mode: this mode enables an activating of communication channels and data exchange between NFC capable devices as of two mobile phones. This may include business cards, coupons, money transfers and others.
- Reader/Writer Mode: reader/ writer mode provides an ability to read information stored on NFC tags or to write data on NFC tags respectively. For example, information on a NFC tag integrated in a smart poster can be read by a NFC smartphone.
Different faces
Currently, there is a variety of cashless payment RFID-mediums circulating the market which differ in their technical characteristics as well as in their areas of application. The technological systems range from open to closed loop systems and may vary in chip standards, transponder shapes and card types for example. In addition, contactless payment functions may be used strictly for payment purpose like MasterCards’ ‘PayPass’ or alternatively be integrated in multifunctional city and tourist cards for public transport such as Octopus or even student passes.
From the sports and leisure market perspective, there is similar diversity of cashless payment alternatives in comparison to other market sections.
Open-loop vs. closed-loop
The main difference between an open-loop and a closed-loop system lies in the amount of acceptance points offered to an end customer. Closed-loop networks accept cashless payment possibilities exclusively at the respective venue or venues which belong to the same system. Distinctive examples for such kind of system in Europe are the ‘Justpay’ model supplied by payment solution or other systems provided by Chess iX and ArenaCult to name a few. With this solution, the payment medium cannot be used anywhere outside the designated stadiums and arenas. In contrast to closed systems, an open-loop network like the ‘Geldkarte’, which is a chip-based e-wallet from the German banking industry, ‘payWave’ by Visa or ‘PayPass’ by Mastercard, allow purchases both in stadiums and at all acceptance points outside the venues.
Another important distinctive aspect is the number of different parties involved in the card issuing, transactions handling and money acquiring process. An open system, such as Visa or MasterCard required separate players for each process such as card issuing banks, independent payment network provided by the organization and the merchant’s financial institutions for diverse settlements. In contrast a closedloop model may be almost entirely supported just by one organization providing all process steps from one source.
Self-operation vs. external-operation
After a decision is made by club or stadium executives to implement a cashless payment solution, there are some vital issues to be considered. For instance, to purchase or to rent a system as well as the decision on who should operate the system. In most cases different cashless payment software and hardware can initially be bought or rented regardless of whether the system operation will be accomplished by the system owner or will be outsourced to a third party. The extent of an outsourcing model may vary thereby depending on the stadium or club needs and range from providing match day support to the complete takeover of the entire solution.
Contactless vs. contact smart cards
Both contact and contactless cards can be applied in conjunction with open or closed loop systems. While contactless transponder technology allows a payment process to be made by holding the payment medium a couple of centimeters in front of a reader device, a contact card has to be inserted into a reader. There are several possibilities to process a contactless and a contact card payment which impact on the overall speed of the selling process e.g. on the local legal dependencies and the club’s / venue’s requirements. Methods such as PIN code input, receipt signature or ‘acceptance button’ slow down the payment process, whereas payment procedures without any confirmation accelerate the entire sales process.
Because of faster transaction times presently most of the cashless payment venues use a contactless technology based on RFID. However, older venues e.g. the Veltins- Arena in Gelsenkirchen or the Amsterdam ArenA may still operate contact card based payment solutions which they innovatively implemented over ten years ago. Though recently, also Amsterdam ArenA has signed a strategic partnership with a Dutch ICT supplier with the intention to replace their solution with an advanced contactless NFC infrastructure.
Critical requirements
An implementation of a cashless payment system is certainly an important decision and a challenge for a club or venue, not simply because of the relatively high investment involved, but also as it implies major changes for the club, fans and the catering company. Several vital aspects therefore must be considered from a technical, financial and operational viewpoint as the complex implementation requires fundamental planning and the involvement of various parties such as the venue owner, operating company, suppliers, public institutions, catering company and others. In order to increase acceptance amongst the fans, the marketing department has to additionally plan a communication process to fans before the cashless payment system goes live. A PR campaign should be developed demonstrating the new procedures and highlight the benefits of the new solution. In general, to ensure a smooth and efficient project, the following aspects should be thoroughly examined during the planning phase.
- critical mass of spectators
- condition of facilities
- number of kiosks and POS
- fan acceptance
- legal requirements
- cooperative approach of a catering company
- reliable and secure IT infrastructure
- network availability in dedicated areas of the venue
- resilient backend architecture
- default concept for Network failure
- interface concept to other stadium systems
- sound Investment planning
- investment participating partner
- purchase vs. leasing/rent
- refinancing plans
- successive gaining of operational know how for cashless payment operator
- employing of operational staff and mobile vendors
- staff training/coaching.