The Future of Contactless Payments
Contactless payments: think RFID cards, Apple and Samsung Pay, and smart watches. Depending on where you are in the world, you’re either familiar with and comfortable using the technology, or you’re reluctant to even give it a try. So, why the geographical differences? Chances are high that one’s willingness to utilize contactless payments stems from their government’s decision, or lack thereof, to embrace near field technology (NFC).
According to Visa, Australia is leading the world in contactless payments, accounting for over 92% of all face-to-face transactions. Meanwhile, the UK, which made the switch to EMV over a decade ago, is seeing a similar trend; contactless payments are now more popular than chip and pin card transactions. In fact, over half of all in-store UK transactions are now “tap and go,” according to Worldpay.
The United States, on the other hand, lags significantly behind. For reference, when Australia hit the 90 percent mark in 2017, the US was at 0.5 percent. The overarching explanation for this jolting dichotomy is this: The United States, which has some of the least secure credit cards in the world, has been historically slow to change in this arena – partially due to its size. The US has thousands of banks and millions of merchants, making another ubiquitous update – still on the heels of the EMV switch – seem like a headache to most. This lack of familiarity with the technology has left Americans skeptical, often (wrongly) assuming that at their worst, contactless payments increase one’s risk of fraud, and at their best, simply take longer.
But that doesn’t mean change isn’t on the horizon. JPMorgan Chase credit and debit card holders can expect to be transitioned to contactless by the end of 2019, the bank announced in November. Similarly, Mastercard has agreements with its bank partners that will bring far more contactless cards to customers, accounting for two-thirds of its total payment volumes within two years. Visa has even announced that 100 million contactless Visa cards will be issued to Americans this year.
As the banks replace non-contactless EMV cards with contactless EMV, the adoption will dramatically increase, as we saw in Canada. Canada went from MSR cards direct to contactless EMV cards, while the US went from MSR to non-contactless EMV. Why did the US do it this way? To save money, since we have so many more cards per wallet. The US market didn’t initially see the need to release EMV non-contactless cards since payment terminals only supported contactless MSR. Each card brand has their own certifications for contactless EMV, making it much more difficult to gain approval on contactless payments here in the US. However, we are now seeing these approvals.
It’s a great time in the US to migrate over to contactless EMV, as all kinds of new terminals that support different ways to pay are becoming available. Fortunately, many of these terminals that accept EMV cards are already enabled for contactless payments. Once major banks adopt the necessary means – and they seem to be heading that direction – smaller banks will likely follow, and consumers will become increasingly comfortable with tapping their cards or phones. After all, tapping is far more convenient, secure and faster than the chip. Talk to your ScanSource representative about what you can do to make sure you stay ahead of these changes, and how you can be sure you’re offering your partners the most secure options available.