Simply get out your card or smartphone, tap it to pay, and be on your way.
This would have sounded like science fiction to many consumers just a decade ago. But today, contactless payment technology is rapidly taking hold amongst consumers – and retailers are expected to keep up.
Contactless payments have skyrocketed as a result of the COVID-19 pandemic, but it’s not the only reason why consumers have been quick to embrace contactless payment options during in-store visits.
So what contactless payment technologies are open to you, and why should you look at adopting contactless payment at your store?
Contactless payment refers to payment methods that don’t require the customer to insert/swipe their payment card or use a pin pad at the point of sale (POS). Instead, they place their chosen payment method (i.e. a card or a smartphone) within close proximity of a payment terminal, which wirelessly processes the payment.
Thanks to the coronavirus pandemic and concerns about virus transmission, contactless payment has seen a rapid uptake globally. According to the National Retail Federation, contactless payments increased by 69% at surveyed retailers during the first six months of 2020, with 94% expecting this increase to continue over the next 18 months.
Contactless payment technology works in one of two ways: Radio Frequency Identification (RFID) or Near-field Communication NFC technology.
RFID is what enables contactless credit or debit cards to ‘ping’ a card terminal and make the transaction, meaning the cardholder doesn’t need to insert or swipe it.
NFC is used by mobile wallets and systems, such as Apple Pay on iPhone or Google Pay for Android, to retrieve card information from a mobile device when a nearby payment terminal is identified. NFC also sends terminals a one-time encryption key to accept the payment, ensuring it can’t be intercepted by an unregistered system.
EMV chip cards became standard in the United States in 2015, after fraud liability was shifted onto retailers by credit card companies. This opened the way for contactless credit cards to become a mainstream payment method. New cards from card issuers and financial institutions such as Visa, Mastercard, and American Express now carry contactless functionality as a standard offering.
A contactless card can be identified by the contactless symbol, which looks like a wi-fi signal turned on its side. This can also be found on prepaid cards, such as public transit passes like New York’s MTA or the London Underground.
According to Fiserv, 68% of consumers say that speed and efficiency are key factors in how they choose to pay. As consumers pursue greater speed and efficiency during the shopping journey, contactless cards present a clear opportunity for retailers to make purchasing even more seamless.
Mobile wallets normally come in the form of apps installed on the user’s smartphone. Customers can add as many cards or bank account details to their wallets as they want. This avoids the need to carry physical cards around.
The biggest benefit of mobile contactless payments is that while people don’t always carry cash or credit cards with them, they almost always have their smartphones. This is a great way for retailers to maximize impulse purchases.
For example, both Starbucks and Dunkin’ Donuts allow customers to make contactless payments via their apps. This enables them to take advantage of their ubiquitous storefronts to bring in higher levels of foot traffic.
QR codes can be used to direct consumers to a webpage hosting any kind of information, but they’re becoming an increasingly popular contactless payment method as smartphone penetration grows.
Once a QR code has been scanned via a smartphone camera, the customer will be redirected to a payment portal where they will input their card details or pay using a mobile wallet.
QR codes offer the advantage of customers not needing to be taken through the checkout process by a store associate. This means that sales can be processed faster and more effectively.
Using QR codes to facilitate contactless payments is especially popular in Asia through the likes of Alipay and WeChat. However, it’s been much slower to take off in Western countries. Despite this, 1.5 billion people worldwide used QR codes to make a payment during 2020.
Contactless payment systems pre-date the pandemic. But the U.S. has been relatively slow to embrace contactless transactions, compared with countries like Australia and Canada. In 2016, just 3% of all U.S. credit cards were equipped to handle contactless payments.
Fast forward to 2021, and the picture looks very different.
According to Mastercard, 51% of Americans are now regularly using some form of contactless payment. As a result, contactless transactions have grown by a whopping 900% since 2017. It’s estimated that the contactless payment market in North America will be worth $309 million by 2024 – an increase of almost 60% in 2021.
The COVID-19 pandemic has driven the bulk of this growth due to concerns about high-touch payment processes that could spread infection. But contactless technology isn’t going away any time soon. 74% of customers surveyed said they plan to continue using contactless payments in the future.
The reason is simple. The COVID-19 might have been the instigator for many consumers to adopt contactless payment, but it also helps solve a range of pain points in physical retail.
Here’s why your business should be implementing contactless payment this holiday season (if you haven’t already):
With consumers and retailers alike adjusting to a ‘new normal’ amid the pandemic, brick and mortar is undergoing a slow but steady recovery. Shopkick’s 2021 survey found that 43% of consumers plan on shopping at physical stores this holiday season – 9% higher than 2020.
But this doesn’t mean consumers are at ease within crowded store settings, whether that be a grocery store or a fashion retailer.
Shopkick also found that a significant number of consumers expect hygiene and social distancing measures to continue this holiday season, with disinfecting spray (48%) social distancing measures (36%), and plexiglass barriers at checkout (34%) the most requested.
Unsurprisingly, payment options are also proving to be a point of concern. More than half of consumers worry about handling notes and coins due to infection risk, while a third are open to stop using cash altogether.
For retailers, the message is clear; contactless payment methods are going to be non-negotiable for many consumers this holiday season. 23% of retailers report they had lost a sale in the past year due to their lack of contactless payment options; you don’t want your business to be in the same boat!
Major data breaches at big-box retailers, including Walmart and Target, have impacted consumer confidence in credit card security. It’s also raised questions about the role that retailers should play in keeping sensitive information safe.
Contrary to what many consumers and retailers think, contactless cards are actually much more secure than their swipe-based counterparts.
But how a card that anybody can tap on a reader be better at combating fraud?
Where it’s easy for fraudsters to steal and clone the card information found in a magnetic stripe, the same can’t be done with an EMV chip. Because payment information is encrypted and can only be unlocked by a verified payment terminal, this prevents data like card numbers from being stolen during a card transaction.
Mobile payments offer consumers and retailers an arguably even more secure payment option. To access their mobile wallet consumers must enter a password, use a fingerprint, or facial recognition, making it next to impossible for someone else to make a payment.
In sum, contactless payment offers retailers peace of mind about security and being liable for possible hacks. And if customers feel secure, they’re much more likely to support your business.
Contactless payments only take a few seconds to complete, which helps to reduce lengthy queues at the checkout – a particular problem during the holiday season.
Long wait times at the checkout add considerable friction to the in-store experience. It’s one of the biggest reasons why many consumers choose to shop online. Combined with the anxiety that many feel about being in crowded indoor environments, retailers could end up pushing customers away from their stores.
Giving customers the option to use contactless methods allows them to get in and out of your much more quickly, boosting the odds of them choosing your business over competitors.
The rise of new payment options such as digital wallets, Buy Now, Pay Later (BNPL), and even cryptocurrency has upped the stakes for brick and mortar retailers.
It’s no longer enough just to offer the standard card options. In fact, almost half of customers say they will abandon a purchase entirely if their preferred payment method is not available.
Today, choice is the name of the game in retail. If a brand doesn’t cater to the experiences that a consumer wants, they’re going to find a vendor that will. By adding contactless payment options to your portfolio, you’re only going to diversify the audience that’s interested in purchasing from you.
If you offer contactless payment it’s important to let customers know – or they could pass you by. Ensure that you have the appropriate signage at the checkout and consider posting this update on social media to give you an edge this holiday season.
Traditional card and cash payments result in much slower checkout times. This can be frustrating for customers who are using contactless payment methods, as they only need to tap and go. Designating a checkout specifically for contactless payments will free up bottlenecks and prevent people from getting stuck behind non-contactless paying customers.
Another great way to manage foot traffic is to bring the checkout to your customer. A mobile card reader with contactless payment functionality makes payment processing a breeze for both retailers and customers. It also prevents large numbers of customers from congregating around a POS, which makes social distancing difficult to enforce.
Contactless payment might have been turbo-charged due to COVID-19, but all signs are showing that contactless payment technology is going to make a lasting contribution to brick and mortar.
From creating more seamless in-store experiences to helping store associates manage transactions more efficiently, there’s a range of long-term benefits to adopting contactless payment methods. By bringing in contactless technology, your brand can reap the benefits of faster, more convenient interactions with customers during the holiday season and beyond.