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Barclays forgoes Apple Pay while boosting wearables-based contactless payments

As Apple Pay gears up to launch in Britain in July, Barclays Bank – one of the region’s major financial institutions – remains an important holdout while ramping up its own wearables-based contactless payments strategy.

Barclaycard first introduced the bPay wristband last year and is now adding a key fob, a sticker that can be adhered to a smartphone or other flat surface and a mobile application, enabling users to make and manage contactless payments. While the financial institution is angling for a dominant role in Britain’s emerging mobile payments market, the strategy could be hampered by restrictions on the size of transactions as well as the growing momentum behind Apple Pay.

“Barclays is a dominant brand in the UK, and bPay has already been proven to be valued by consumers,” said Thad Peterson, senior analyst at Aite Group, Atlanta, GA. “It’s also riding the rising tide of contactless payment that’s occurring in European markets.

“It’s also a pretty straightforward solution for low value payments,” he said. “This combination should ensure fairly strong take-up and the choice of form factors should help ensure a broader base of potential customers than a mobile only solution.

“However, since mobile payment penetration in the UK is currently very low, it’s likely that both bPay and Apple Pay can succeed, and that the combination of the two, along with Google and Samsung down the road, should increase penetration and usage for all of the players.”

Everyday purchases
The bPay devices use contactless payment technology, which is available at more than 300,000 merchant locations in Britain. Some of the merchants where the devices can be used include Marks & Spencer, Starbucks and McDonald’s.

Anyone with a Visa or MasterCard debit or credit card registered in Britain can add funds to the devices using the program’s mobile application, not just Barclaycard and Barclays customers. Users also have the option of having funds added automatically when their balance falls below a pre-set level.

The devices can be used to pay for transactions with a value of up to 20 British pounds. In September, the limit will be increased to 30 British pounds.

Users can take advantage of a brand-new online portal and multi-platform app to buy, manage and top-up their devices.

The app will allow users to view their transactions in real-time, transfer funds to their digital wallet on the go and manage each of their device’s settings.

Barclaycard is promoting the devices as ideal for making everyday purchases such as public transportation tickets, grocery shopping or for sports and fitness fans who want to leave their wallets at home.

Reducing friction
The devices will go on sale on July 1 on the new bPay ecommerce store, Consumers will also be able to purchase the devices in bricks-and-mortar stores starting in August, including at CycleSurgery and Runners Need locations.

The bPay sticker costs 14.99 British pounds, the fob 19.99 and the band 24.99.

No fees are attached for transactions, usage or topping up the devices.

The news comes as contactless payments continue to grow in Britain, rising 331 percent in 2014, according to the UK Cards Association.

While many major financial institutions in Britain have already gotten behind Apple Pay, Barclays is an important holdout. The financial institution has been focused on building a presence in mobile payments for several years and also offers Pingit, a mobile peer-to-peer money transfer service.

With Apple Pay readying to launch in Britain in July as well, one important differentiator for the technology company’s offering is that there will be no restrictions on the value of transactions.

“BPay is great for low value transactions, but it’s going to force customers to always carry more than one form of payment and in some cases they may choose bPay when it can’t be used which could cause some friction,” Mr. Peterson said. “And it’s a prepaid offering requiring top-up.

“While they offer automatic top-up as an option, it’s still more friction than having a payment methodology that can handle transactions of any size,” he said.

Final Take
Chantal Tode is senior editor on Mobile Commerce Daily, New York