By David Poole, Contactless Payments Lead at digital business transformation consultancy, Publicis Sapient

The pandemic changed how consumers pay, and now contactless payments are set to be the predominant method of payment. David Poole, Contactless Payments Lead at Publicis Sapient puts the case for contactless payments and discusses how businesses should react and prepare

Contactless payment has been around since the mid-1990s, yet it took a pandemic to take it mainstream in the US. Given the risk of COVID-19 exposure, health authorities and banks encouraged shoppers to avoid handling cards, checks and cash. Meanwhile in the UK, according to Barclaycard, the figures rose to 88% of card transactions being made via contactless payment, a 7% increase over prior year. This buying behaviour is likely to stick around after the health measure becomes less important: the truth is, contactless is faster, more convenient, and more secure than swiping. And contactless is impacting consumer behaviour in a way that can’t be ignored by either merchants, or the finance industry.

Contactless impacts purchasing decisions

In Publicis Sapient’s study of consumer behaviour, the Digital Life Index, contactless technology was shown to influence purchases in travel and hospitality:

• 78% of travellers choose contactless technologies as one of the top three factors influencing choice of hotel, preferring mobile check-in-checkout, touchless room keys and paperless invoicing
• 55% of diners choose contactless as one of the top three factors influencing choice of restaurant, preferring mobile apps, contactless payments, self-service kiosks and curbside delivery or pick-up
• 40% of travellers choose contactless technologies as one of the top three factors influencing choice of airline, preferring contactless check-in and baggage check kiosks

Contactless benefits stakeholders across the mix

Contactless is now becoming a game-changer. Each stakeholder group is benefitted:

• Consumerswant fewer apps to accomplish their goals. If payment is integrated into their favourite social or shopping apps, that method becomes top of their digital wallet.  Contactless enables a simpler process, and consumers will come to expect it.
• Card issuersenjoy higher interchange revenue with each contactless tap. Of note, taps with contactless debit are three to four times more frequent than credit cards.
• Merchantsgain from additional transactions with contactless spend $125-$200 more per month. They also avoid bottlenecks at checkout. No wonder that 95% of new terminals ship with contactless capabilities.

Business is gearing up

The sideways Wi-Fi symbol on a payment card is the contactless indicator. According to Aite, 52% of cards include the chip and radio frequency identification (RFID) for touchless payment. The same symbol is now at 90% of merchant terminals (Source: Mastercard) indicating support of contactless. The symbol is also in transit cards like those for the London Underground and New York subway. The same terminals can often accept smart phones with NFC (Near Field Communications) to access payment cards from mobile wallets like Apple Pay or Google Pay. Or simpler still, Quick Response (QR) codes can provide a shortcut to payment apps like AliPay.

In 2020, 83% of UK consumers used contactless, which accounted for more than a quarter of all payments (Source: UK Finance). To limit the virus being transmitted via surfaces, the cap was raised from 30 GBP to 45 GBP in 2020, and again to 100 GBP in October 2021. This higher limit opens up more spend categories, like the weekly groceries or a full tank of gas. The catch is shoppers becoming tap happy and irresponsible with the ease of payment. Also, while safer than swiping, there is more risk of fraud than chip and PIN.

Why does contactless technology matter to leaders in the finance industry?

Consumers, merchants and issuers are demanding this feature as table stakes to be competitive. Yet more importantly, it enables contactless commerce, and the growth opportunities that come with removing impediments to transact. Not simply the friction at physical point-of-sale. It also enables contactless commerce like the Amazon Go store where shoppers just walk out with their purchases. It is also necessary for future economies built in the metaverse, where consumers will need contactless payment in a virtual world.

How can leaders in finance prepare for the contactless future?

Ensure your company is flexible enough to accept contactless payments, or as a processor can facilitate others using these payments. Spend limits will rise, so prepare security and fraud measures.

One of the biggest impediments to contactless is behavioural. Some consumers and merchants are reluctant to change how they pay or accept payments, and They may not be aware of the option, or misunderstand how it works or the cost and risks involved, or they’re simply set in their ways and not given a compelling reason to change. This presents an opportunity to communicate the benefits and availability, to educate and to walk the resisters through and to reap the rewards in loyalty. If either a merchant, or a consumer’s first contactless experience is negative, they may be unwilling to try again. Conversely, if the experience is positive, they will likely return to the same provider. Contactless needs strong, positive marketing, and those that don’t invest in this area will pay a price. Just including the icon on cards and terminals is not sufficient.

Innovate to grow

New applications of contactless will proliferate, so rather than following the noise (i.e., wearable payments, VR payments, pay by face, pay by voice), skate to where the puck is heading, which is a cashless future where money requires neither physical currency nor physical contact.

Contactless is not yet the primary way people pay globally, yet since the pandemic introduced this new habit, limits are being removed and all stakeholders are enjoying the benefits, it is likely to quickly gather pace and spread, eventually eliminating most other forms of payment.

In CSI’s recent 2021 Banking Priorities Executive Report, only 15% of executives listed contactless payments as their highest payments priority. This needs to shift. Your approach to payments needs the flexibility to be part of that future.