In 2018, less than 0.5% of transactions in the U.S. were contactless; over approximately 3 months, contactless transactions have risen 150%. According to the global consulting firm A.T. Kearney, the U.S. lagged far behind other countries in utilization of the technology despite its deployment in 2003. But now, with the COVID-19 “new normal,” people in the U.S. are understandably less inclined to use cash or anything that would require shared contact with other people. Cash is no longer king in the U.S., at least for the moment. What are contactless payments, why didn’t we see this prevalence before, and will this new wave last?
What are contactless payments?
Contactless payments are a way to pay with a card or phone without physically swiping a card, passing a card to a person, or having to come in contact with surfaces others have touched. It is the ability to tap a card, scan a code, or pay online for a purchase. Tap-and-pay systems rely on near-field communication (NFC), Bluetooth Low Energy (BLE) or Quick-Response Codes (QR Codes) which only works within small distances, less than a few inches. This is the technology relied upon for things like Apple or Google Pay. There are even card-less ATM’s that utilizes a scanning mechanism or phone or a simple swipe for a consumer to withdraw cash. This kind of transaction is designed to be quick, efficient, secure, and effortless for the consumer.
Why did the U.S. lag behind other countries in utilization of contactless payments?
Some believe the reason the U.S. has lagged so far behind other countries in the adoption of contactless payments has to do with saving money and purchasing the necessary technology. Others indicate that merchants are unsure consumers will utilize the technology and are unwilling to invest in the point-of-service terminal technology. Contactless new to consumers, so their fears may not be unfounded. Additionally, banks are unwilling to invest in contactless cards until merchants will invest in the terminals, and they won’t until they are sure consumers will use it.
It also cannot be discounted that an underlying ideology or philosophy about the dollar has kept it propped up in the U.S. so much so that it took a pandemic to take it down a notch. Simple, human reasons for a reticence to adopt contactless payments should not be dismissed so easily. Contactless is new, unknown, and though certainly more efficient, it relies entirely on technology that you cannot see. There’s a sense of security in using cash, one that contactless transactions still lack to a certain extent.
Is this a permanent shift to more contactless transactions?
Some believe that as consumers utilize contactless payment more during this pandemic that they will be reticent to return to cash. The idea is that they will see how efficient and quick this kind of payment can be and will prefer it over cash. Additionally, because we do not know how long this pandemic will last, it can be assumed that we will see an increase in usage for its duration. However, there are many cultural and personal reasons one might wish to return to cash. Contactless payments may inadvertently lead to debt accumulation or unnecessary overdraft fees in a way that cash does not. Additionally, while certain contactless payment methods may remain popular, others still require extensive investment in technology. Apple Pay and Google Pay as well as online payment transactions may sustain this trend, but until stores fully re-open, we won’t know if contactless cards will become a new norm.
Final Thoughts
The more familiar consumers become with the technology, and the more they see its benefits, contactless payments may finally become the norm in the United States. We can be certain, though, that for as long as this pandemic lasts cash will not reign supreme. That throne, for now, belongs to contactless payment systems.