Payment card giants Visa and Mastercard anticipate that COVID-19 will accelerate adoption of contactless payment tech, potentially addressing the to-date somewhat laggardly uptake in the US. It’s a shift that could be crucial for merchants and buyers in terms of kickstarting a post-pandemic recessionary economy.
As noted in Chris Middleton’s previous article, contactless payment has been in far greater use in Europe than in the US, but the public health implications of handling hard cash may well be the wake-up call needed for consumers and merchants to ditch the dollar bills and the check books in favor of something ‘cleaner’.
It’s certainly on the radar of the major card issues, with Visa CEO Al Kelly commenting this week at the Piper Sandler Global Exchange & FinTech Conference :
One of the really positive movements related to what's happened with COVID-19 is that people are seeing cash as something that carries germs and we've seen numerous merchants actually say, ‘Hey, I don't want to pay cash’. So I think it's going to accelerate the adoption of tap to pay in the United States.
And there’s a lot of room for catch-up, he adds, noting that in 12 countries around the world over 90% of Visa’s transactions are contactless, while in 50 countries, more than 50% of the face-to-face transactions are:
It's the most frictionless way to pay in a face-to-face environment for both the consumer and the seller or the merchants. It has really become a default in many parts of the world. The US is much further behind, but gaining momentum> We have just about 200 million cards in the United States now that are enabled for tap-to-pay [Visa’s term for contactless]. It is the most in the world by the way. We hope to have 300 million enabled by the end of this calendar year, but that's still only a third of the 900 million credit, debit cards that are in the United States.
At Mastercard, there’s a similar worldview that the pandemic will act as a catalyst that might be regarded as overdue. Speaking to the MoffettNathanson Payments, Processors and IT Services Summit, Craig Vosburg, Mastercard Head of North America, reckons:
Contactless has been an important theme for us as a company for many years and obviously has had much greater success in penetrating payments volumes in markets outside the US. Inside the US, it's been more of a challenge to create the adoption around contactless, but it's been no less of a priority for us to be an enabler of that. We've been working with issuers to get them, to recognize the benefits of contactless and begin to reissue cards with contactless capability. In light of current events, a number of them are accelerating the re-issuance of contactless cards to get them into the hands of consumers more quickly. We've been working on the merchant side to work with acquirers and individual merchants to ensure the contactless capable terminals are available at the point of sale.
Vosburg believes COVID-19 is going to have a massive impact, dubbing it “the most forceful catalyst we could have imagined” for changing consumer behavior. This, in turn, changes merchant strategic approaches:
Suddenly nobody wants to touch anything that they don't know, recognize, trust, haven't cleaned, and that includes terminals, that includes pens, that includes who's working on the other side of the counter. Nobody wants to touch anything. Therefore, as a catalyst for changing consumer behavior, we're seeing a very significant uptake in consumers embracing contactless as a way to pay, we’re seeing merchants encouraging consumers to use contactless payments.
We're seeing growth on the order of 40% in contactless transactions worldwide. We're seeing similar rates of growth in the US and while it's off a very low base as a starting point…I believe long before COVID, that we were finally at a point where the US was on its way to becoming a contactless market. I believe that even more today and we'll get there sooner because of the circumstances we're in with COVID.
On the downside, ongoing public health concerns will inevitably still come into play as more organizations trial contactless capabilities, according to Jack Forestell, Visa’s Chief Product Officer, at the Bank of America Securities 2020 Global Technology Conference:
If you think of contactless transaction like a consumer product, you’ve got to get people to try it and then you’ve got to get them to repeat it. With a product like this one, where you’ve got to try it in physical space, with other people around - there's someone on the other side of the checkouts, there's people behind you in line - there’s a little bit of apprehension there.
But overall, the benefits are clearly going to outweigh any lingering concerns:
I think what's happening here is those apprehensions are just being obliterated by COVID. I actually have heard stories of other shoppers kind of pointing out to people that they could use contactless because their cards has been enabled.
And sellers want this shift as well, in Forestell’s assessment:
There's certainly movement happening here. We can see it in our own numbers. I actually see it in my text messages. I have had so many people take pictures from around the world where sellers have put together signage that says, ‘Please use contactless’…When merchants put up that little bit of encouragement, we start to see the contactless transaction rates popping.
Leaving the public health implications to one side, a shift to contactless tech also provides financial services providers and retail merchants with a better customer experience to Vosburg’s mind:
It's smooth. It's easy. It's seamless. It's quick. You pull out a card, you tap it, you put it away and you're on your way. It is a very good consumer experience. In this day and age of technology and the evolution of technology, you need to continue to deliver a great consumer experience to ensure someone else doesn't figure out a way to deliver a better consumer experience than you can.
This is an evolution for our industry in providing a great consumer experience. It was a great experience to go from cash or writing a check to using the card; it was a great experience for the cards to go from being those paper-based ‘zip-zap’ things to being electronic; it’s a great experience for the card to go from being electronic and you have to sign for us; now you just tap and you go, and that it's just an evolution of that path.
And that CX improvement is critical to the wider digital commerce experience, which Forestell finds lacking in its current form:
It's too complicated for consumers. It results in too many bad outcomes, high shopping cart abandonment, too many failed transactions, too much fraud. The click-to-pay solution is really designed to streamline the whole consumer experience by offering a stronger security tokenization, improved transaction success rate and ultimately, better outcomes for the consumer and more sales on the merchant side.
I’ve always been surprised on visits to the US how tech-enabled financial transactions in shops, bars, cafes etc appeared to lag in terms of adoption and capability compared to Europe. I can’t recall how long ago it was since I personally had a check book. And tapping to pay in a shop has been standard practice for me long before it became a public health convenience in recent months. Driving uptake of contactless payment in the US could be another of those ‘unintended silver linings’ that we’re starting to isolate out of the pandemic crisis as we inch towards the re-opening of shops and other businesses. And any knock-on improvements to the wider digital commerce experience as Visa’s Forestell alludes to, would be hugely welcome.