Contactless payments are on the rise, approaching 1 in 5 personal card payments

Nearly 20 percent of all personal credit or debit card transactions in the U.S. are now contactless, Visa reported during its earnings call on Jan. 27, 2022. Of the two types of contactless payments, the company says tapping a card at the point of sale is much more common than tapping a card at the point of sale. using a mobile payment service such as Apple Pay or Google Pay.

That surprises me, since Americans are obsessed with their phones. A Visa spokesperson speculated that it’s easier for consumers to tap a card, which doesn’t weigh much, than to take a heavier phone out of their pocket or purse and then follow the multi-step process to unlock the app and use their card. verify identity.

https://www.youtube.com/watch?v=FFJITZ7YRN8%E2%80%9D

New York City leads the way

In the Big Apple, 45 percent of in-person card transactions are contactless. The city’s metro and bus system started accepting contactless payments on a limited basis in mid-2019 and fully by the end of 2020. This isn’t the only way to pay for train and bus rides in New York, but it’s far more popular than officials expected.

In July 2021, New York’s Metropolitan Transportation Authority announced that its customers had made 100 million tap-and-go payments. Monthly consumption grew rapidly from about 6 million taps in January 2021 to nearly 17 million in June 2021.

The COVID-19 pandemic has encouraged many people to use contactless payment methods because they were concerned about touching potentially faulty payment terminals. Public transport is an ideal use case for contactless payments as it is a quick and easy way to pay for a train or bus fare. But ironically, passenger traffic has been devastated by the pandemic as many people have switched to remote working and spent less time in crowds.

Still, the data from New York suggest a significant halo effect. Public transport remains a lifeline of the city’s culture despite the pandemic. Someone’s first contactless payment experience might have been a subway or bus fare, and then they carried this new habit elsewhere. Tapping on a card or phone is also popular at takeaways, supermarkets, pharmacies and other locations where people like to get in and out quickly.

In San Francisco, Oakland and San Jose, more than 30 percent of in-person card transactions are contactless, Visa says. In Los Angeles, Seattle, Detroit, Miami and Salt Lake City, the ratio is above 25 percent.

America is catching up with the rest of the world

Although a recent phenomenon in the US, contactless payments have been popular in other countries for several years now. For example, in 2017, 92 percent of Visa in-store transactions in Australia were contactless. Singapore (63 percent) and Canada (47 percent) were also early adopters.

Jumping forward to the fourth quarter of 2021, Mastercard said half of its global personal transactions were done with a tap. Visa also referred to strong growth, especially in the US, India and Brazil. In fact, contactless use in the US has more than doubled in the past 12 months, the payment network revealed. It is, of course, still well below the global average.

America never seems to be ahead of the curve when it comes to adopting new payment methods. We also lagged the rest of the world in moving from magnetic stripes to more secure chip-enabled (EMV) credit and debit cards.

In October 2016, the major card networks made an important change. They shifted liability for fraudulent transactions from banks to merchants (assuming the customer paid with an EMV-compatible card, but the merchant couldn’t process it). Traders grumbled about the cost and complexity of upgrading their systems, and many missed the deadline. Still, chip card adoption has become almost universal in the 50 states in recent years. Even gas stations, the last notable holdouts, which won a liability shift extension until the end of 2021, have made great strides.

This is relevant to the contactless discussion as most EMV compatible payment terminals can also handle contactless transactions. The US financial sector chose to focus on chip cards first to prevent consumers from getting confused with these newfangled chips and ticking at the same time. In recent years, many of us have gradually become accustomed to both.

From 2018 to 2020, US card issuers sent hundreds of millions of contactless cards to their customers. Technology giants like Apple and Google have also aggressively pushed their mobile payment services. While speed appears to be the main draw of contactless payments, mobile payments can also be more secure as they often involve a biometric screening process facilitated by the user’s smartphone. In other words, you can prove it’s you by scanning your face or fingerprint.

it comes down to

It’s taken a while, but contactless payments have become commonplace in America, and further exponential growth is likely as more consumers become familiar with the technology.

Do you have a question about credit cards? Email me at ted.rossman@bankrate.com and I’ll be happy to assist you.

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