Visa® payWave®, MasterCard® PayPass™, Apple Pay, Samsung Pay and Android Pay are just some of the newest ways to pay that rely on the convergence of contactless payments via a chip-enabled card or activated mobile phone and near-field communication (NFC) technology. The combination allows shoppers to hover their phone, or their credit or debit cards, over the point-of-sale and complete a secure, encrypted transaction, fast.
In the US today, most consumers are used to paying with cash or pulling out his or her wallet, grabbing a card, and either swiping or inserting the card into the point-of-sale terminal. But contactless payment usage is on the verge of taking off in the US, similar to the trend happening around the world.
In the US, three factors will contribute to the tipping point, whereby the use of contactless payments will become ubiquitous: 1) card issuers and US banks get more contactless cards into the hands of consumers, 2) a strong push for contactless payments by US businesses and 3) consumer demand.
1. Contactless Card Availability
Card issuers and banks hold the lion’s share of power to swing the pendulum in the US. When more consumers have contactless cards, more transactions happen contactlessly. Currently, contactless card penetration in the US is among the lowest in the world. In the UK, for example, nearly 60% of credit and debit cards are contactless and in South Korea, that percentage is even higher at almost 96% compared to only about 3.5% in the US, according to recent research by ATKearney.
Recent statements by Visa and other US card issuers indicate that they will increase the availability of these cards to US consumers in the near future. Visa estimates there will be 300 million contactless cards issued in the US by the end of 2020, up from the predicted 100 million at the end of this year as announced on its 2018 Q4 earnings call.
Mastercard is also bullish on the influx of contactless cards it will produce in the coming years. President and Chief Executive Officer Ajay Banga said, “We have received commitments from issuers representing approximately two-thirds of our total US consumer volume to issue contactless cards within the next two years.”
A.T. Kearney reports that there will be a massive effort on behalf of US banks to rollout contactless cards in 2019, with the top 10 banks launching contactless by 2020. It estimates that by 2022, 56% of the cards in the US market will be contactless.
2. Business Adoption
As global evidence proves, business and infrastructure conditions are large influencers in consumers’ adoption of new payment choices. For example, adoption of contactless cards in the UK was hastened when London’s public transit system migrated to contactless payments as the preferred payment method in 2014. Over time, UK consumers became accustomed to tapping and paying at a point of sale. Now, 53,000-plus new contactless mobile or card payments are made each day through that transit system alone.
In the US, the recent news that NYC’s subway system, the Metropolitan Transportation Authority (MTA), will now accept contactless credit and debit cards resembles how the contactless payments evolution began in the UK. Additionally, Apple is now developing methods for Apple Pay users to tap their phones at parking meters and on Bird scooters.
Many US businesses are already enabled to accept contactless payments today. Of the top 50 merchants in quick-service restaurants, 79% are contactless-enabled, 77% of drug stores and pharmacies and 61% of grocery stores in the US can accept contactless transactions. Increased US business adoption presents a strong case for the acceleration of a shift to contactless.<
3. Consumer Demand
Chances are you have had customers ask if you accept mobile payments. That’s the demand for contactless payments talking, and it’s about to get even stronger. Consumers report that they are ready for the enhanced security that contactless payments provide as well as quicker transaction times garnered through a simple “tap and pay” motion.
A recent AT Kearney study mentions that US consumers see contactless payments as “secure, simple, and fun.”
By simply tapping to pay, consumers can cut down their wait time at checkout. A contactless transaction is much quicker than any other method of payment, allowing consumers to make the most efficient use of their time and businesses the ability to generate more transactions in the same amount of time.
Contrary to popular belief, contactless payments are more secure than other forms of payment. Although not visible, when a contactless payment transaction occurs, the account data is tokenized into a one-time code and passed from the card or the mobile device to the contactless reader. In a contactless payment transaction, the consumer’s card details are never revealed, unlike in a typical card payment, making the contactless transaction safer and more secure.
Many consumers love to experiment with new tech that puts them on the cutting edge. Today’s digitally-savvy generation has no problem trying out the latest technology innovations and won’t hesitate to tell their friends and family about their experiences. Adopting contactless payments is another way for them to stay ahead of tech trends.
The tide is shifting in favor of contactless payments in the US. Every business owner should make it a priority to be well versed on contactless payments. Global Payments offers contactless EMV solutions like the iCT 250, which enables swipe, dip and contactless options for business owners to offer their consumers. It also portable so you can use its flexibly in your business. A product like Mobile Pay supports contactless payments, cash, and swipe/insert transactions from your mobile phone, giving you the ability to do business while you’re on the go.
The speed, security, and convenience of contactless payments is a leap forward in payment technology. Once consumers start building new muscle memory, we’re going to see increased evidence of retailers and service providers providing fast, secure transactions to further facilitate the seamless customer experience expectation. Prepare now for this change; you’ll be ahead of the curve, and ready to grab a piece of the next wave of commerce.