Have you ever made a contactless payment with your credit card?
Just hold your card over the card reader or type it on a notepad. It takes a few seconds. Wait for the beep and you’re done. No swiping, inserting or entering your PIN code.
If you live in the United States, the statistics show that you probably haven’t. While 56% of transactions in the United States included a card in 2018, less than a third of 1% of those transactions were contactless.
But the novel coronavirus pandemic is changing the way we think about payments (along with just about everything else). Americans are concerned about the use of cash and the highly tactile nature of card readers – and they are increasingly opting for contactless payment methods.
We are still far behind countries like South Korea and the UK. But COVID-19 could start to change that.
- The United States lags far behind much of the developed world when it comes to the use of contactless payments.
- 55% of American consumers are worried about handling cash.
- 31 million Americans paid with a Visa contactless card or digital wallet in March 2020, 6 million more than in November 2019.
- 80% of contactless payments are under $ 25, a range generally dominated by cash.
- 69% of users find contactless transactions more convenient than those involving paper money.
- 85% of mobile wallet users expect they will still make payments this way two years from now.
- Consumers may prefer contactless technology over other factors, such as a generous reward rate.
The United States was far behind in the adoption of contactless payments before COVID-19
Contactless payments have become the norm in many parts of the world, but not in the United States.
In fact, while the first contactless card was issued in the United States in 2003, only about 3.5% of credit and debit cards in the United States include contactless technology. Even among the best credit cards, this functionality is not ubiquitous. By comparison, nearly six in 10 cards in the UK and almost 96% of cards in South Korea offer the contactless payment option.
While other parts of the world have adopted this technology, the United States has been slow to adopt it largely because of its decentralized banking system. While many small European countries have only a few banks serving almost every citizen, the United States has more than 5,000 commercial banks.
The additional complexities associated with pushing thousands of banks and merchants to adopt uniform standards for new compensation structures also explain why the United States was also one of the last countries to adopt chip technology and with PIN code.
55% of consumers fear handling cash
Although U.S. consumers have been slow to switch to contactless payments, COVID-19 is speeding up the process.
The novel coronavirus has raised concerns about the exchange of money, with 55% of American consumers are worried about handling cash. Since contactless technology does not require consumers to hand over their money or cards to a cashier or interact with a chip and PIN machine, it is seen as a more secure alternative. In fact, 82% of consumers think it’s a cleaner way to pay.
As consumers aim to keep their distance from other individuals, it’s no surprise that they are flocking to this safer payment method in record numbers.
MasterCard revealed that 79% of card users worldwide are now opting for contactless transactions. This reflects a 40% growth in the number of contactless transactions worldwide in the first quarter of 2020.
Closer to home, the data also shows that contactless payments are on the rise in the United States, with 31 million Americans by choosing to pay with a Visa contactless card or digital wallet in March 2020. This is a big increase from November, when 25 million customers used contactless technology to pay, and an increase of 150 % of US contactless usage compared to March 2019.
Traders also picked up the trend, with 27% of small businesses report an increase in contactless payments in April 2020.
80% of contactless payments are less than $ 25
As COVID-19 has shut down non-essential businesses and Americans have taken shelter, contactless payments have become a particularly common way to pay for necessities.
In fact, transactions involving contactless payments have grown twice as fast as contactless transactions in grocery stores and pharmacies. Costco, one of the largest warehouse stores in the United States, saw a 60% increase in contactless payment usage in March 2020 compared to the previous year.
Contactless payments haven’t simply replaced the use of other credit and debit cards. Up to 80% of contactless transactions that took place were for purchases under $ 25.
Mastercard has indicated that payments of this size are normally made in cash, so this change suggests that people are particularly concerned about the risk and inconvenience of handling paper money.
74% of people plan to continue using contactless payments after COVID
The shift to contactless payments is unlikely to turn around, with 60% of users saying their use of contactless technology during the pandemic has made them more comfortable with it, and 74% saying that they plan to continue using contactless payment methods after the pandemic ends.
Speed and ease of use are the two main reasons consumers are likely to continue using contactless payment methods even after the dangers associated with using cash or traditional card have worn off. . Contactless payments are up to 10 times faster than other in-person payment methods, and 69% of users find contactless transactions more convenient than those involving paper money.
Mobile wallet users were particularly happy with their contactless experience, with 77% indicating that mobile wallets were even more convenient than other contactless transactions, and 84% saying they prefer this payment method over cash.
Those who use contactless payment methods use them frequently, with 50% of consumers responding to a PaymentSource study indicating that they had made contactless payments at least four times in the past month. And most plan to continue using the technology for the long haul, with 85% of mobile wallet users predicting that they will still make payments this way two years from now.
As consumers increasingly use contactless payment options, the value of contactless transactions in the United States is expected to increase from $ 178 billion in 2020 to $ 1.5 trillion in 2024. This will help triple values. global contactless transactions, which Juniper Research predicts will grow from $ 2 trillion this year to $ 6 trillion in four years.
It will also speed up the shift to a cashless society, with which 57% of consumers told PaymentSource they were more comfortable after using contactless payment methods during COVID-19.
38% of consumers consider contactless “table stakes” for a card
The rise of contactless payment methods may permanently change the way consumers choose a credit card, as more Americans favor options that include contactless payment technology, even over credit cards offering more generous rewards.
Up to 46% of consumers worldwide have already changed their default credit card (called their wallet card) to one that offers contactless functionality. And in the United States alone, 38% of consumers at the start of March said that a contactless feature was a need for “table setting,” compared with just 26% who saw it as a necessity during a day. previous period.
Card issuers are likely to respond to this shift in consumer priorities by making contactless payment available with more cards. And as this change occurs and more Americans take advantage of the speed and convenience of contactless payment methods, it is very likely that the United States will soon be more like the rest of the world in terms of number of transactions made without contact.