How contactless payments took off in just one year

At the start of 2020, contactless payments were constrained. In countries like the U.S. and India, they were either lacking adoption or actively opposed; and in other parts of the world, contactless payments were held to strict transaction limits before requiring extra authentication.

But the year — and the coronavirus pandemic — caused a dramatic shift in attitude. Many consumers and merchants now saw contactless cards and mobile payments as a way to move ahead without the germ fears that come with touching cash and PIN pads. And even after those fears subsided, the new habits stuck around.

This story was compiled from reporting by PaymentsSource writers including John Adams, Kate Fitzgerald, David Heun, Michael Moeser and Daniel Wolfe.

Cracking down

The Reserve Bank of India (RBI) headquarter building in Mumbai, India.
Ironically, in a year that would see contactless card payments rise worldwide, the payment card format started off under pressure from the Reserve Bank of India (RBI), which in January announced it would require all advanced features such as contactless to be turned off for new and re-issued cards until the user opts-in.

Issuers were also required to disable contactless features for existing cards that have never been used online, internationally or in a contactless transaction. The change was made under the claims of improved user convenience and increased security.

In the U.S., contactless cards weren't specifically under fire, but several cities had been pushing back on cashless stores like Amazon Go, arguing that the stores' focus on mobile and QR code payments discriminated against shoppers who could not use those options.

Raising the roof

Mastercard
In March, Mastercard almost doubled contactless transaction limits across 29 different European countries. And in April, Mastercard increased the contactless payment limit to CA$250 across Canada to provide consumers with a safer way to pay during the coronavirus pandemic.

The previous transaction limit was CA$100 before an additional cardholder verification method such as a PIN was required.

The increases in the U.K. Ireland, Estonia and Poland were announced to be permanent, while other countries such as Netherlands and Greece adopted higher limits as a temporary measure during the coronavirus pandemic.

The effects of these policies were already evident by May, when Mastercard announced that about 78% of its European transactions were now contactless — and that the card network expects the shift in payment choice will be permanent.

Barclays boom

Barclays window sign
By April, Barclays had experienced an incremental £264 million in contactless spend in the month since it raised its per-transaction limit in response to the coronavirus pandemic, which created an aversion to cash and contact payments.

The main cause for this higher volume is in direct response to Barclaycard raising its contactless limit from £30 to £45 on March 24 in response to consumer fears about touching in-store payment terminals during the COVID-19 pandemic. A month after the shift, Barclaycard reported seven million additional transactions had been processed between the old and new limit amounts.

A wider net

EU flag
Contactless payment volume surged during the first four months of 2020 in Denmark, Norway, Sweden and Finland, accounting for about 70% of all transactions, according to new data from Copenhagen-based payments technology firm Nets.

In an area already renowned for minimal usage of cash, consumers in the Nordic region looking to minimize contact with payment terminals during the coronavirus pandemic have pushed contactless payment adoption to some of the highest rates in the world, Nets said in May.

Denmark ranked highest in the area, with 80% of all transactions taking place at contactless terminals, followed by Finland at 64%, Norway at 60% and Sweden with about 50% contactless transactions, Nets said.

Grocery gig

Grocery delivery
People who order groceries for delivery may be using digital payments or a plastic card to pay for their food, but the person picking up the groceries may be making a separate payment at the point of pickup — and in the process, influencing the global shift toward contactless payments.

Even before the coronavirus pandemic Marqeta had been promoting contactless payments and mobile wallets as a means to quickly enable its gig economy clients to add contractors to their workforces. Having the ability to quickly add gig workers with contactless cards and digital versions for mobile wallets has been critical in enabling the rapid growth of gig economy workforces targeting food and grocery delivery.

Lesser magic

Disney World
By June, Walt Disney Co. had at least temporarily cut several reservation and incentive features tied to its closed loop payment system, revealing the complexities of mixing health guidance with tourism.

The Disney amusement parks — located in California, Florida, Tokyo, Paris, Hong Kong and China — had cancelled the FastPass+ reservations that visitors use to schedule times for attractions to cut lines. Disney was also cutting dining plans, which allow customers to prepay for meal credits at the parks and resorts. Disney also cancelled its free dining promotion for guests who stay at Disney-owned hotels.

While these features are normally designed to shorten lines and would discourage crowding, the theme park was trying to adhere to broader overall guidance on crowds in its facilities, particularly restaurant capacity.

Tangled in this dilemma is Disney’s MagicBand, an all-purpose wearable that acts as a room key, payment device, theme park ticket and FastPass+ device. Disney also supports open loop payments such as mobile wallets to discourage cash, but places a greater emphasis on its MagicBands.

Amazon goes even more contactless

Amazon Go turnstile entrance
Called Amazon One, the new palm service, which debuted in September 2020, uses contactless palm scanners to authenticate people for shopping at two of its checkout-free Amazon Go stores in Seattle.

These stores had already seen some backlash because their invisible, digital payment systems largely exclude people who prefer cash; and the idea of adding biometrics on top of that may have been seen as a step too far.

But by late 2020, people had become accustomed to digital payments as an alternative to handling cash or touching a PIN pad. Amazon's system requires consumers to dip a card to enroll, and every trip thereafter becomes touchless. Instead of scanning a QR code from an app, as Amazon Go stores did since their debut, the new system uses a palm scanner to identify shoppers and control access to stores.

More mobile

visa contactless debit card
As merchants and consumers increasingly favor contactless payments over the course of the COVID-19 pandemic, Visa is removing obstacles to contactless acceptance.

Visa in October took its dongle-free mobile card acceptance project out of pilot, announcing that it has rolled out in 15 markets, with the U.S. expected to be added in 2021. Called Visa Tap to Phone, it enables businesses to accept contactless payments on any NFC-enabled Android device without any other plug-in hardware.

Visa also introduced a partner program, Visa Ready for Tap to Phone, to speed the developer’s functional evaluation from two months to a few hours. And the card network has been outspoken about which pandemic payment habits will continue even after the coronavirus comes under control.

No ticket

MetroCard turnstiles MTA
As commuters find ways to safely return to work, New York's Metropolitan Transportation Authority has fully rolled out contactless payments throughout all subway stations and buses.

The technology, called the OMNY payment system, isn't fully featured. So far OMNY only supports pay-per-ride contactless mobile payments, with free transfers. In the next phase of OMNY’s development, users will have the option to buy discounted fares in advance.

The MTA plans to completely phase out the MetroCard payment option by 2023.

Brexit boost

Union Jack flag and Big Ben
At the dawn of 2021, UK Finance proposed more than doubling the upper limit on contactless payments in Britain, in one of its first moves following the U.K.'s official separation from the EU.

Early in the pandemic, U.K. banks raised the ceiling on contactless payments from £15 (US$20) to £45 (US$60), but the limit could soon rise to £100 (US$136) from £45 if the U.K. treasury approves the move. The request from the bank lobbying group would require approval by Britain’s Financial Conduct Authority.

Full circle

India and China on a globe
Even India, which began 2020 by cracking down on the use of contactless cards, warmed to the format in 2021. Effective Jan. 1, 2021, the RBI increased the limit for contactless payments from Rs2,000 to Rs5,000 (about $27 to $68).

In its announcement, RBI acknowledged that contactless cards can help make payments safer during the ongoing pandemic, and have proven overall to be more convenient for consumers.
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