Contactless payments: The future is here

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If contactless payments were once a solution in search of a problem — as skeptics long maintained — their moment has finally arrived.

Before the pandemic, it wasn’t much of a hassle for most U.S. shoppers to insert a physical card and type a few buttons on a terminal. Sure, some early tech adopters embraced Apple Pay. But most of us were content to pay in ways that, while a bit slower, were familiar, consistent and reliable.

With the coronavirus crisis, germaphobia is changing that calculus. “People don’t want to touch the terminal,” said Peter Reville, an analyst at Mercator Advisory Group.

He expects use of contactless payments — whether they take the form of a mobile wallet or a touch-free credit card — to rise by 10% to 15% as a result of the pandemic.

More broadly, industry analysts expect digital payment methods, which were already enjoying rapid growth, to gain traction even more quickly as Americans change their habits.

As in-person dining was banned early on in the pandemic and curbside pickup turned into a thing, online payments, particularly using mobile apps, quickly became more ubiquitous. The eventual easing of social distancing orders is unlikely to slow that momentum, because many consumers who downloaded mobile apps when the pandemic hit have simply grown used to not waiting for their sandwiches or caramel macchiatos.

Even before COVID-19, banks and other financial services companies were making investments in contactless payments technology. “Obviously the pandemic makes that business case even stronger,” said Cary Whaley, who works on payments issues at the Independent Community Bankers of America.

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For banks, the surging popularity of contactless payments will generate even more swipe fee revenue. At the same time, the anticipated spike in adoption puts pressure on small banks and credit unions to launch touchless products.

American Express, Capital One, JPMorgan Chase, Citigroup and Wells Fargo are among the big banks that currently offer contactless cards.

The virus has also changed incentives for U.S. retailers. Previously, many merchants were indifferent to contactless payments, and they often failed to ensure that their customers’ mobile wallets worked consistently.

But now, spotty effectiveness has become a bigger annoyance for shoppers. Retail clerks may also pressure their employers to provide greater distance from customers at checkout.

In the early stages of the pandemic there was little time for the strategic pivots and marketing changes that might lead to increased use of mobile wallets. Payment industry executives say they expect consumer adoption will continue to increase over time.

Already, hygiene concerns about cash are leading to more contactless transactions, Mastercard Chief Financial Officer Sachin Mehra said in late May. “And we think that’s long-term sustainable,” he added.

COVID-19 will likely be with us for a long time, which suggests that in-store shoppers will have plenty of time to form new habits.

“The longer it goes on, the more it gets ingrained,” said Daniel Dawson, an associate at RBR, a payments research firm based in London.

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Contactless payments Mobile payments Apple Pay Coronavirus