The adoption of contactless cards is being dwarfed by that of alternative payment methods in the US, according to market participants.
“While people may be aware of [contactless] I don’t know if it’s being used as broadly as everyone would like it to be,” says Mark Bunney, director of go-to-market strategy for merchant payment company, Ingenico, “but I wouldn’t say the US has missed the boat, it’s part of the evolution.”
According to consultancy AT Kearney contactless transactions amounted to $200m in 2018, and projects that figure to hit $700m in 2019. That’s compared to nearly half of all in-store payments in Europe according to Mastercard numbers.
But Daniel Kornitzer, chief business development officer at Paysafe, believes this is a “natural pattern for new and unknown technology”.
“Once contactless has fully filtered into the mainstream we will see the rate of adoption accelerate dramatically, possibly reaching the current European levels of 50% of all in-store payments by 2023,” he said by email.
As Wells Fargo becomes the most recent US bank to join Amex, Capital One and Chase in issuing contactless cards, both Bunney and Kornitzer believe retail banking customers are not yet comfortable with the technology.
While Bunney thinks the issuers and schemes are pushing contactless cards, education still needs to happen at the consumer level, and may even rely on customer acquaintance with an older technology: “From our view, this is a great time and opportunity because it gets the consumer experience back to what they were used to before EMV with the contactlessness of magnetic swipe readers,” says Bunney.
Kornitzer on the other hand does not necessarily believe that cards are the way to a contactless future and that other payment methods have stolen the march.
“It could be argued that contactless cards will not have the same relevance in the US as they do elsewhere because NFC-enabled mobile wallet technology is already migrating payment preferences away from cards to smartphone and wearable technology,” said Kornitzer, adding that it wouldn’t necessarily make card payments obsolete, and rather, that the two methods will evolve “in parallel”.
Those mobile wallets, spearheaded by the likes of Apple and Google Pay as well as the introduction of Alipay, have also been helping spread the contactless infrastructure across the US, according to Bunney.
“I was with some mobile wallet providers at NRF in January who thought that ironically, an increase in contactless cards would also increase mobile wallets,” says Bunney, adding that tap and go is not as important a feature as loyalty and rewards for many mobile wallets.
Likewise, appetite for contactless among merchants is also healthy, with a Paysafe survey revealing that over 60% of North American SMEs plan to accept near-field communication (NFC) technology – that underpins contactless - in the next two years. Bunney says that 90-95% of Ingenico’s supplied POS terminals supported contactless back in 2015.
But while merchants may have had the functionality for years, it is only recently that major retailers are enabling contactless and only then those who are most suited to low transaction value and fast service.
Target chief information officer, Mike McNamara said in January this year that it would implement contactless, “offering guests more ways to conveniently and quickly pay is just another way we’re making it easier than ever to shop” along with an educational how-to guide. Recent comments on the post suggest contactless is yet to be rolled out fully across all Target stores.
There’s a similar story at Starbucks with confusion over whether contactless is accepted or not evident in this post, the author reasoning that the merchants are pinning their hopes on the reward and loyalty app.
On the other hand, Walmart is putting its bets on QR codes and their own app, something Bunney believes is risky and could put them at a disadvantage as customer pressure develops.
It would seem that contactless adoption is caught in a Mexican stand-off as providers wait for merchant green light, merchants wait for consumer demand, and consumers wait for issuers and mobile wallets, and vice versa.
It may well be that mobile wallets shoot first, with Kornitzer pointing to Paysafe research which reveals that 77% of consumers believe mobile wallets are more convenient than contactless cards, while 85% believe they’ll be using mobile wallets more frequently in two years’ time.
Likewise, Bunney believes that adoption will come down to how significant a portion of the consumer population hedge their bets on mobile wallets or contactless cards.
“Not everyone is enamoured with doing payments on their phone,” he says “because you still need a wallet for ID, credit cards and cash. The challenge with any new technology in the market is you’re going to have different adoption rates, depending on the customer.”