Contactless Turns Ten: The Shift to Contactless Universal Payments is Now Well Established
In September 2007, Barclaycard first introduced contactless payments to the UK. Ten years on, and many Brits would no longer want to live without a contactless card in their wallet. In fact, six out of ten Brits now pay with "touch and go," and according to the UK Cards Association 108 million contactless cards are in circulation in the UK, with volumes of transactions currently reaching £400 million per month.
Contactless is enabling the accelerated adoption of mobile payments
While these numbers sound impressive, the impact of contactless will go way beyond plastic cards. Personally, I believe contactless technology is a hugely impressive piece of social technology. It has helped usher us into a completely new era of mobile payments, where consumers feel comfortable to not only wave cards, but also smartphones and wearable devices (like watches or rings) over a card reader or device to initiate a payment.
Clearly there has been a network effect helping the widespread success of contactless, both in the UK and other European countries; new cardholders can observe fellow shoppers casually waving a card. And retail cashiers increasingly expect to be presented with a contactless card at nearly half a million payment terminals across the UK. They will often gently nudge a customer, “Is it ok if I tap it for you?” Contactless stopped being a minority sport, in the UK at least, many years ago.
Making the shift from chip to contactless cards will prove to be a necessary enabler for the accelerated adoption of mobile payments in mature payments markets like the UK. Consumers have become comfortable with the new ‘ceremony’ of waving a card near a device, rather than inserting it into a slot. And this realization will make it so much easier to accept the next step of ‘waving’ to pay – which in many cases will be a mobile device instead of a card.
It seems inevitable that the shift to contactless universal payments will take place. If current adoption rates continue, mobile contactless will reach 3 billion transactions in the UK in 2020 (in other words, the same volume as card contactless in 2016). This will be an impressive catch up if the current momentum can be sustained. This kind of growth could prove to be a great success story for the cards industry, particularly if the most common way of funding a mobile wallet is by linking consumers’ existing payment card details into the new mobile apps. Users of Apple Pay or Amazon Pay are accessing an existing MasterCard or Visa card, using the standard technique of ‘tap and go,” albeit hidden behind a mobile facade.
What’s next for contactless cards?
It is tempting to think that debates about consumer payment techniques and standards may now be “done and dusted.” But, perhaps controversially, I think the future for contactless may be a bit more “touch and go.” Now that consumers are happy to wave a phone and not a card, will it be that hard to add new, non-card instruments into those mobile wallets? How about bank accounts, which will be newly secured, authorized and authenticated using the techniques that European public policy initiatives like the Payment Services Directive (PSD2) are nudging markets towards adopting.
Beyond our familiarity with contactless here in the UK and in markets where consumers have grown up with plastic cards, the transaction volumes for contactless usage are dwarfed by the figures of (predominantly Chinese) mobile payments users, who use alternatives to contactless – specifically optical barcode scanning techniques – within schemes like Alipay and WeChat Pay.
Personally, I find optical QR-codes unpractical and fiddly, but having seen their total ubiquity on a recent trip to China, I have to concede that more than 600 million regular users cannot all be wrong. More importantly, a significant proportion of this user base travels abroad and – not unreasonably – expects retailers to be familiar with their preferred way to pay. Which is why high-value merchants across Europe and the U.S. are currently working hard to add Alipay and WeChat Pay to their POS systems.
Despite the impressive volumes, I still doubt QR-codes will derail the progress of contactless. One reason is that many of us living and working in card-dominated markets are probably not too keen on making fools of ourselves by learning yet another “payments ceremony.” But it would also be foolish to ignore the impact that schemes like WeChat Pay will have on developing markets, where consumers have previously neve held a bank account, never mind a contactless plastic card.
Related Blog Posts
What Will 2020 Bring for Payments in Latin America?
2019 was yet another year of payments disruption throughout the LATAM region. Thanks in large part to the proliferation of fintechs, Latin American banks and processors have been under immense pressure to modernize their offerings, while also gaining the agility to quickly bring new products to market.
Request for Payment and Other Real-Time Payments Trends That Will Shape 2020
In 2020, the conversation around real-time payments will increasingly be about what banks can do with real-time, as they move beyond setting up to support real-time payments schemes. New use cases will emerge – but there are a few main trends that are likely to shape the direction of real-time in the year ahead.
2020: The Year of (Near) Cashless Transactions?
Happy belated New Year and raise your hand if you make and/or follow New Year’s resolutions. I used to and then realized they were exercises in futility. But, over this past holiday, I thought I’d give the resolution game one more shot. This one was more a realistic goal than it was a resolution, but who can really tell the difference anyway!?! I decided to go cashless over the holidays, which can still be somewhat challenging for many in the US (though my friends in other countries are probably ridiculing me right now). I was traveling (to NYC and Florida) and wanted to pack as little as possible (in both my luggage and my wallet). I’m all about loyalty card points these days, hence the 2 back-to-back trips.
Three Merchant Payment Trends to Watch in 2020
In 2019, merchants everywhere were challenged by pressure from new entrants, the continued breakdown of traditional industry boundaries and growing customer preference for a digitally-led or digitally-influenced purchasing experience.
The Invisibility Cloak of Payments: What Are the Consequences?
If you could pick any superpower, what would you pick? Children often pick "invisibility.” Oh, the possibilities of being invisible! What fun! You can walk into a candy store and take all the candy you want, you can stay downstairs late with your parents and listen to what they’re saying, you can sneak out without anybody noticing… But when you think about it, there are also disadvantages that come with this superpower.
Looking Back at Money20/20 USA: Where Do We Go From Here?
Now that the dust has settled on another successful Money20/20 USA in Las Vegas, it allows for a moment of reflection on what some of the announcements and trends mean for the ever-changing financial industry. Discussions spanned a variety of topics, including the future of international and digital expansion of PSPs, how organizations developing cryptocurrency wallets plan to enter the payments space, and how challenger banks plan to revolutionize the banking experience. Inclusivity was a recurring theme throughout – and nowhere was this more evident than in the Rise Up program.
2020 Fraud Predictions: What to Expect Across the Globe as Cybercrime Evolves
Our payment experts take stock of the trends that shaped 2019 and make their predictions for where they see the industry heading in 2020.
I sat down with our own fraud experts, Marc Trepanier, principal fraud consultant for North America, and Giselle Lindley, principal fraud consultant for APAC, to get their thoughts on what we can expect in the year ahead around payments fraud.
Real-Time Payments Hits Its Stride in the U.S.
The recent announcement of FedNow in the U.S., the launch of cross-border services like SWIFT gpi, and multiple real-time payment systems including The Clearing House’s (TCH) RTP system and Zelle underline the fact that real-time payments are here to stay. The need to deliver real-time payment services to customers has never been more pressing for banks, credit unions, processors, acquirers and fintechs. However, the U.S. payments ecosystem – and its infrastructure – must keep pace with global markets to remain competitive, and interoperability between real-time payment systems will be key.
Deep Dive: Latin American Fintech Market (Part 2)
To support fintechs’ development and create a more inclusive financial system, governments across the Latin American region should adopt different regulations. Some good practices implemented in other countries, like the U.K. or Singapore, could also be adopted in Latin America, such as temporary exemptions on fintech authorizations on behalf of regulating entities, or the creation of temporary regulation sandboxes in which fintechs can operate, evaluate their business models and offer their innovative products in supervised environments.