We’re living in a time where every business in every industry is having to rethink the way they run everyday operations. Consumers are turning to contactless payments as a way to purchase goods while remaining safe. As we move forward, if you want your business to remain healthy, you must accept contactless payments.
Just 2 years ago contactless payments were almost unheard of in the U.S. While in other countries, such as the UK and Korea, consumers readily accept and widely use contactless technology. In fact, in Korea, 96% of the cards issued were contactless credit cards. More and more, contactless-enabled credit cards fill consumer’s wallets. But they are also carrying smartphones, smartwatches, and other wearables with mobile wallets and leaving the real thing at home.
Payments made using contactless technology go by many names. Most of the time we refer to them as contactless payments, but you’ll hear consumers using the term tap-to-pay as well. And when you use a mobile wallet, you might say mobile pay, ApplePay, or SamsungPay. But they all refer to making a contactless payment.
Contactless payments are made possible through the use of NFC technology, or Near Field Communications. NFC technology falls under the umbrella of radio-frequency identification (RFID). NFC uses radiofrequency to allow objects within a close range of each other to communicate. The two devices must be pretty close to connect, from 4cm to 10cm.
The technology can be used with chip-enabled cards or an NFC compatible mobile wallet. With a contactless card, the NFC technology is embedded right into the chip on the card. Mobile wallets have the NFC technology built into the smartphone or watch.
The U.S. is finally experiencing a rise in the use of contactless payments.
Just a few years ago there was almost no saturation of contactless payment tech in the U.S. However, in equally developed countries contactless payments are already commonplace. Across Europe, Australia, and Korea contactless use is anywhere from 50%-90% of all transactions.
But there are several factors that are finally fueling the growth of contactless payments in the U.S. What with the constant evolution of smartphones and wearables, greater adoption of EMV/NFC payment terminals, and growing consumer adoption and comfort levels with technology, it was inevitable.
But now, things are changing much more rapidly due to the Coronavirus pandemic. Contactless payments are quickly becoming the most sanitary way to make payments. People have been very concerned about touching things as heavily used as payment terminals at the time of checkout. Even going to the grocery store can seem dangerous.
Several factors fuel the growth of contactless payments adoption.
Now more businesses across the country are able to accept contactless payments than before. New EMV compliance requirements went into effect in October 2015 that required greater security for payment transactions. While it has been slow, this has led merchants to update their payment terminals to EMV terminals. These newer EMV compliant terminals are also already equipped with NFC, so they’re contactless payment compatible.
In addition, every major card brand in the U.S. has begun to issue contactless chip-enabled credit cards to their cardholders. Some are issuing new cards now, others are issuing contactless cards as consumer’s cards expire. Visa already had 100 million cards in circulation by the end of 2019, with plans to have over 300 million in circulation by the end of 2020.
Mobile wallets allow any consumer to complete contactless payment transactions with any card. Even when their bank or card issuer hasn’t yet issued an NFC chip-enabled tap-to-pay card, the mobile wallet fills the gap.
Several cities have implemented contactless payments within their mass transit systems. They’re also using NFC technology for ticketing. Users simply open the app and scan a barcode or QR code for access to the transit.
All these factors have played into the recent growth of contactless payments. Consumers needed a reason to adopt the technology and change old habits. But they also needed the confidence that it was accepted everywhere. The more contactless technology becomes commonplace in the market, the easier it is for consumers to adopt. With more cards that offer contactless payments, more mobile wallets available, and more terminals accepting contactless transactions, now they can become the norm.
Is your business keeping up with the pulse of society and ready to accept contactless payments?
We’re also seeing more use of dedicated store apps by consumers. It’s become common for storefronts such as Starbucks, Chipotle, and Port of Subs to create their own apps complete with rewards and in-app payment options. This use and comfort with digital technology by consumers also fuels convenient frictionless payments. People are paying for their items from right within the app. While this is not true contactless payments, it is an indication of consumers need to have quick, convenient and frictionless ways to pay for their goods.
Consumer behavior is changing rapidly. Whether contracting Covid from surfaces such as money is realistic doesn’t matter. The Covid-19 pandemic has led to a shift in consumers’ perception of touching things that see a lot of consumer traffic.
Contactless payments are more secure than dipping the chip into the terminal.
Consumers are also more concerned than ever about credit card fraud and identity theft. Contactless payments give them the added layer of security they’re looking for. Using the NFC technology embedded in the chip on the card is more secure than dipping the chip into the terminal. That’s because each transaction generates a onetime use, dynamic code or token. Even if a hacker got the code, there’s no way to decode it and get the credit card information.
A contactless payment made using a mobile wallet uses the same tokenization of sensitive information, but also includes an added layer of security. Opening the wallet requires its own authentication by the owner. The wallet will only open by entering a PIN, password, or form of bio identification such as fingerprint or facial recognition.
With greater use of contactless payments over the last few years, there’s been a significant decrease in payment fraud globally. Card brands such as Visa use multi-;layered security protocols to protect their customers from credit card fraud. Using contactless payments adds an extra element of protection over and above the normal security protocols. And it protects the consumer from coming in close contact with possibly contaminated surfaces.
Tap-to-pay is also Faster and more convenient than the chip.
Remember when the chip first came out? Boy, were consumers annoyed. It seemed to take forever for the transaction to be approved. And it kind of was forever. Chip-enabled transactions used to take as long as 30-45 seconds to complete. Now with tweaks to the software, they’ve shortened that to about 15 seconds.
Contactless transactions, however, are approved in just a few seconds.
Once consumers realize how quick and convenient it is to use tap-to-pay, they’re usually hooked. No more digging in the bottom of their purse or even bringing a wallet into the store. You can stop and grab groceries on your way home from the gym and pay with your smartwatch. And mobile phone owners never go anywhere without their phone in hand.
Not only are contactless payments faster and more convenient, but they’re also safer. Contactless technology adds another layer of protection against fraud and allows for social distancing. Whether consumers tap-to-pay with their contactless credit card or tap with their mobile wallet depends on personal preference. But either way, consumers show that their real preference is touchless payments that are also frictionless.
If your terminals are not contactless ready, now is the time.
If you want to keep your business relevant, you must listen to your customers and stay with the current trends. Right now trends are overwhelmingly moving towards greater use of contactless payment technology by consumers.
We’ve always believed merchants need to give their customers multiple options for paying the way they want. Now, offering the option for contactless payments accomplishes that. But it also gives your customers the confidence and peace of mind to shop with you. It shows them you care.
At Bankcard Brokers, our goal is to provide you with the solutions you need to be successful. We make it our business to stay on top of the latest technology and security protocols. And for us, security is paramount. When you’re in the payments industry, it has to be.
Our advisors are all ETA-Certified payments Professionals. This knowledge allows them to advise you on the solutions that are the best fit for your business. All our payment terminals are fully EMV compliant and NFC capable.
If you’re still using an old mag-stripe reader, or you’re ready to upgrade to EMV compliant, NFC payment terminals, call us. We’d love to show you “The Bankcard Brokers Difference!”