The Contactless Revolution: How Merchants Can Adapt

By Pete Bettles, Chief Operating Officer for Global Payments UK&I

Coronavirus has dramatically changed the way we shop – and how we pay. While many of our payments are now made remotely via online services, merchants that are operating in a physical environment have been forced to rapidly pivot as shoppers increasingly turn to contactless in-store. In fact, recent data shows that two-thirds of all Mastercard transactions in the UK are now contactless and 43% of people report using contactless more often since the start of the COVID-19 pandemic. 

This has been accelerated by the contactless spend limit being raised. On the 1st April 2020, the limit on contactless payments was raised from £30 to £45 in the UK and from €30 to €50 in Ireland – the fourth such rise since the technology was introduced. Originally set at £10 in 2007, the cap was raised to £15 in 2010, £20 in 2012, and then to £30 in 2015. For retailers, this means that over the coming weeks and months customers will continue to pay for their more expensive purchases using contactless methods. Payments providers will have updated their software to phase the changes in, enabling retailers to accept the new higher limit. Importantly, these changes won’t have any impact on Apple and GooglePay transactions, as the biometric security built into the devices means that these are already unlimited.

Accelerating an already emerging trend

However, the trend towards opting for contactless over other more traditional payment methods, such as cash, was gaining pace before the pandemic. Prior to the outbreak, we were already seeing how SME merchants in particular were expecting to see an uptick in alternative payment methods.

The research showed that across the UK, cash was already fast falling out of favour. London was expecting to see the largest decline, with other areas of the UK following behind. An average of two in five SMEs in the UK (41%) cited cash as the most used method of payment in 2019, but only half (22%) expected it to remain so in 2020. This gap is particularly wide for London, where two in five (39%) SMEs reported it as the most used method in 2019, but only one in ten predicting that this will be true in 2020 (13%).

Furthermore, alternative payment methods were also rising in popularity. SMEs expected alternative payments, like mobile wallets such as Alipay, to dominate in Greater London and Scotland this year. UK-wide, they were also expected to rise, with 7% of SMEs citing it as the most common payment method in 2019 but predicting that the figure would more than double in 2020 (16%). Merchants in Greater London and Scotland expected to see the largest increases in this payment type, with increases from 4% to 17% and 6% to 30% respectively.

Ensuring a smooth transition to the new normal

It’s fair to say that the payments landscape is a complex one, whether you are an SME in the South East or a small business in the West, and many are left wondering how to navigate it. The COVID-19 pandemic has shone a light on the need to be able to shift to accepting different payment methods in line with societal expectations and necessary actions. Being aware of the variety of payment options, and particularly those that are contactless, is an important first step. Merchants that have an awareness of their evolving payment trends will always be ahead of the curve when it comes to preparing the business for change.

Second to that is facilitating transactions. Whether it’s alternative payments or simply making sure they’re prepared for the higher contactless limit, merchants need to be ready to accept the consumer’s chosen payment method. This requires a frictionless, end-to-end payment system that is seamless, secure and simple for both the consumer and the company delivering it. 

Thirdly, it’s never too early to plan. While we don’t expect every consumer to suddenly materialise alternative payments over the next few months, merchants should be mindful of underestimating the uptake of technology, as the COVID-19 pandemic has shown us. It takes a very short amount of time for word to spread about more efficient ways to get things done, and today’s consumer is more resourceful than ever before. Moreover, they hold customer experience in the highest regard and now, more than ever, those first to market with innovative but effortless experiences will gain an important foothold in the market and encourage consumers to feel confident making in-store purchases as the high street begins to reopen. 

As we see shops across the country begin to reopen, no matter what region you are based in, the importance of having a trusted partner to facilitate the payment methods that are now critical for customers cannot be dismissed. A valued payment partner will support merchants by providing guidance and insights in an ever-changing payments landscape and at such unprecedented times such as these. With the right technology to do all of the hard work and the right partner to guide the process, merchants can begin to look forward to recovery as normal business begins to resume.