Ever since people started sheltering at home to limit the spread of the coronavirus, retail industry experts have been speculating how this would affect the use of cash and cards in the retail market. Here are our thoughts on the impact of COVID on retail payments, and how you can get prepared for the coming demand for contactless payments.
Use of Cash Will Continue to Decline
One impact of COVID is the rapid acceleration away from the use of cash. Cash is being increasingly perceived as ‘dirty’ with the potential to spread the virus. According to an April 2020 study by Link ATM, 76% of consumers surveyed said that COVID would negatively impact their use of cash.
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Consumers Do Not Want to Provide Written Signatures
Historically, retail customers were asked to provide some sort of written or electronic signature to help prevent identity fraud. While this is no longer required by most card brands, the collection of signatures remains a policy at many retailers. But COVID is causing consumers to resist providing written signatures. Safely collecting signatures in today’s environment usually involves the use of some sort of sanitized shared stylus or pen – or managing different groups of ‘clean’ and ‘used’ pens. But even with these safety efforts, most customers would prefer to skip signatures all together. According to a recent study following the start of COVID, Mastercard found that close 3 of 4 consumers would prefer not to sign a payment receipt.
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What Exactly Are Contactless Payments?
Contactless payments are a way of paying for goods or services without physically needing to swipe or dip your payment card in a payment terminal or hand a payment card to another person. This can be done in several ways, including tapping a smart phone with a mobile wallet and near-field communications chipset (NFC) to a payment terminal at a checkout counter or waving a contactless credit card with a NFC chip over a similarly equipped payment terminal.
How Contactless Payments Work
Contactless payment systems generally use radio-frequency identification (RFID), a popular technology built upon electromagnetic fields. RFID employs memory chips that store data or “tags,” plus RFID readers that decode the message. Using this technology, devices in close proximity can ‘talk’ to one another. RFID is a mature technology used every day for tasks like package-tracking, inventory management and toll collection.
Contactless payment systems use a form of RFID known as near-field communication (NFC). This is a newer and more complex technology that only works when there is a small distance between objects—usually a few centimeters. The range is extremely limited by design, as it provides security to the user. With NFC, there is no danger that you will accidentally pay for the dinner tab of a someone sitting at the next table. NFC is the underlying technology for all sorts of services, from mobile wallets like Apple Pay and Google Pay, to e-ticketing to mass transit cards.
NFC should not be confused with EMV. While both NFC-enabled and EMV payment cards contain chips, only NFC-enabled cards will function for no-touch payments. Cardholders can easily tell if their card has NFC capabilities by checking to see if the card displays a contactless indicator, which looks like a Wi-Fi symbol turned sideways.
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The Technology is Available Today for Contactless Payments
Payment terminals with contactless payment technology have been deployed widely in the US for many years – but U.S. consumers have been slow to adopt it.
One of the issues was the availability of contactless payment cards. While contactless cards are ubiquitous in many parts of the world, this was not always the case in the U.S. In 2018, just 3% of cards in use in the U.S. were contactless, versus around 64% in the U.K. and up to 96% in South Korea, according to a study by A.T. Kearney.
But that is rapidly changing. Most of the large U.S. card issuers have been blanketing the country with contactless cards for the last year. Today, an estimated 40% of cards in the marker have contactless capabilities, a result of banks and credit unions steadily replacing expiring EMV contact-only cards with NFC-enabled cards.
COVID Driving Acceleration of Contactless Payments
Americans have been forced to rapidly change many behaviors during the COVID pandemic to incorporate social distancing and other protective measures. Instead of handing over cash or a standard credit card, consumers are now increasingly using contactless cards – and they like it! According to a study by the Futurist Group, the view of contactless payments has shifted from unfavorable to favorable. The benefit of contactless cards over cash and other types of card payments, such as an EMV chip card, is that they eliminate contact and possible infection from physically interacting with a POS payment terminal.
Overall usage of contactless payments in the US has risen 150% since March 2019. This is great news for large issuers like Chase, Wells Fargo, Citi and Bank of America, which have made large investments throughout the past year in deploying contactless cards.
Benefits and Considerations for Contactless Payments
Customer Safety – Eliminates contact between customer and employees of retailers and payment terminals.
Security – Experts generally consider NFC payments to be secure. The technology uses the same standard established by EMV chips, which effectively reduced fraud and instances of counterfeit cards used in-store.
Convenience – Contactless payments are a convenient way for customers, retailers and banks to conduct seamless, swift and socially distant transactions. Once set up, the systems are relatively maintenance-free.
Speedier Transactions – Contactless payments lend themselves to speedier transactions. While the transaction time for a chip-enabled card can be as much as 30 to 45 seconds, a contactless transaction can reduce that to as little as 10 to 15 seconds.
There are several potential limitations to contactless payments:
- Not all payment terminals accept contactless payments. About 60% of merchants’ POS terminals support payments with contactless cards or mobile payments such as Apple Pay, Google Pay or Samsung Pay. If you do not have contactless-supported POS terminals installed, your customer will be forced to use an EMV chip dip or traditional swipe.
- Accessibility. Not all consumers have access to technology like NFC-enable mobile wallets or contactless smart cards. Those who rely exclusively upon cash transactions—people without a bank account, for instance—may find themselves unable to pay for things if retailers go 100% mobile-only.
- Transaction limitations. Since tap-to-pay systems do not require a signature or a PIN, maximum purchases are often limited. The exact amount cardholders can spend or withdraw depends upon the card issuer and sponsoring bank’s policies.
Wrap Up
Although the jury is still out on just how likely it is to catch COVID-19 by touching surfaces or objects, retail businesses may want to want to minimize perceived risk by their customers of handling cash and credit cards. From tap-to-pay card transactions to no-touch ways to pay for public transit, the current environment is causing demand for contactless technology to take off.
Ever since people started sheltering at home to limit the spread of the coronavirus, retail industry experts have been speculating how this would affect the use of cash and cards in the retail market. Here are our thoughts on the impact of COVID on retail payments, and how you can get prepared for the coming demand for contactless payments.
Use of Cash Will Continue to Decline
One impact of COVID is the rapid acceleration away from the use of cash. Cash is being increasingly perceived as ‘dirty’ with the potential to spread the virus. According to an April 2020 study by Link ATM, 76% of consumers surveyed said that COVID would negatively impact their use of cash.
IMAGE
Consumers Do Not Want to Provide Written Signatures
Historically, retail customers were asked to provide some sort of written or electronic signature to help prevent identity fraud. While this is no longer required by most card brands, the collection of signatures remains a policy at many retailers. But COVID is causing consumers to resist providing written signatures. Safely collecting signatures in today’s environment usually involves the use of some sort of sanitized shared stylus or pen – or managing different groups of ‘clean’ and ‘used’ pens. But even with these safety efforts, most customers would prefer to skip signatures all together. According to a recent study following the start of COVID, Mastercard found that close 3 of 4 consumers would prefer not to sign a payment receipt.
IMAGE
What Exactly Are Contactless Payments?
Contactless payments are a way of paying for goods or services without physically needing to swipe or dip your payment card in a payment terminal or hand a payment card to another person. This can be done in several ways, including tapping a smart phone with a mobile wallet and near-field communications chipset (NFC) to a payment terminal at a checkout counter or waving a contactless credit card with a NFC chip over a similarly equipped payment terminal.
How Contactless Payments Work
Contactless payment systems generally use radio-frequency identification (RFID), a popular technology built upon electromagnetic fields. RFID employs memory chips that store data or “tags,” plus RFID readers that decode the message. Using this technology, devices in close proximity can ‘talk’ to one another. RFID is a mature technology used every day for tasks like package-tracking, inventory management and toll collection.
Contactless payment systems use a form of RFID known as near-field communication (NFC). This is a newer and more complex technology that only works when there is a small distance between objects—usually a few centimeters. The range is extremely limited by design, as it provides security to the user. With NFC, there is no danger that you will accidentally pay for the dinner tab of a someone sitting at the next table. NFC is the underlying technology for all sorts of services, from mobile wallets like Apple Pay and Google Pay, to e-ticketing to mass transit cards.
NFC should not be confused with EMV. While both NFC-enabled and EMV payment cards contain chips, only NFC-enabled cards will function for no-touch payments. Cardholders can easily tell if their card has NFC capabilities by checking to see if the card displays a contactless indicator, which looks like a Wi-Fi symbol turned sideways.
IMAGE
The Technology is Available Today for Contactless Payments
Payment terminals with contactless payment technology have been deployed widely in the US for many years – but U.S. consumers have been slow to adopt it.
One of the issues was the availability of contactless payment cards. While contactless cards are ubiquitous in many parts of the world, this was not always the case in the U.S. In 2018, just 3% of cards in use in the U.S. were contactless, versus around 64% in the U.K. and up to 96% in South Korea, according to a study by A.T. Kearney.
But that is rapidly changing. Most of the large U.S. card issuers have been blanketing the country with contactless cards for the last year. Today, an estimated 40% of cards in the marker have contactless capabilities, a result of banks and credit unions steadily replacing expiring EMV contact-only cards with NFC-enabled cards.
COVID Driving Acceleration of Contactless Payments
Americans have been forced to rapidly change many behaviors during the COVID pandemic to incorporate social distancing and other protective measures. Instead of handing over cash or a standard credit card, consumers are now increasingly using contactless cards – and they like it! According to a study by the Futurist Group, the view of contactless payments has shifted from unfavorable to favorable. The benefit of contactless cards over cash and other types of card payments, such as an EMV chip card, is that they eliminate contact and possible infection from physically interacting with a POS payment terminal.
Overall usage of contactless payments in the US has risen 150% since March 2019. This is great news for large issuers like Chase, Wells Fargo, Citi and Bank of America, which have made large investments throughout the past year in deploying contactless cards.
Benefits and Considerations for Contactless Payments
Customer Safety – Eliminates contact between customer and employees of retailers and payment terminals.
Security – Experts generally consider NFC payments to be secure. The technology uses the same standard established by EMV chips, which effectively reduced fraud and instances of counterfeit cards used in-store.
Convenience – Contactless payments are a convenient way for customers, retailers and banks to conduct seamless, swift and socially distant transactions. Once set up, the systems are relatively maintenance-free.
Speedier Transactions – Contactless payments lend themselves to speedier transactions. While the transaction time for a chip-enabled card can be as much as 30 to 45 seconds, a contactless transaction can reduce that to as little as 10 to 15 seconds.
There are several potential limitations to contactless payments:
- Not all payment terminals accept contactless payments. About 60% of merchants’ POS terminals support payments with contactless cards or mobile payments such as Apple Pay, Google Pay or Samsung Pay. If you do not have contactless-supported POS terminals installed, your customer will be forced to use an EMV chip dip or traditional swipe.
- Accessibility. Not all consumers have access to technology like NFC-enable mobile wallets or contactless smart cards. Those who rely exclusively upon cash transactions—people without a bank account, for instance—may find themselves unable to pay for things if retailers go 100% mobile-only.
- Transaction limitations. Since tap-to-pay systems do not require a signature or a PIN, maximum purchases are often limited. The exact amount cardholders can spend or withdraw depends upon the card issuer and sponsoring bank’s policies.
Wrap Up
Although the jury is still out on just how likely it is to catch COVID-19 by touching surfaces or objects, retail businesses may want to want to minimize perceived risk by their customers of handling cash and credit cards. From tap-to-pay card transactions to no-touch ways to pay for public transit, the current environment is causing demand for contactless technology to take off.
