Exclusive: ‘Hands up for hands off’ – Gillian Shaw, RBR in “The Fintech Magazine”

RBR forecasts that the pandemic-accelerated shift to tap-and-go payments is likely to continue – even among slow adopters like the USA, says analyst Gillian Shaw.

COVID-19 has acted as a catalyst that has accelerated many changes in banking and payments that were already underway. Of all these changes, such as the increased use of online banking and the ecommerce-driven shift to electronic payments, it is perhaps the switch to contactless that has been most noticeable in everyday life.

With social distancing critical, both consumers and merchants alike have shown a strong preference for tap-and-go payments. Enabling faster transaction times and reducing the need for shared physical touchpoints (such as the handling of cash or the touching of card terminals), the adoption of contactless has increased significantly since the crisis began.

Although accelerated by the risks of the pandemic, RBR’s Global Payment Cards Data And Forecasts To 2024 report reveals how increased contactless card issuance and acceptance, combined with changes in consumer behaviour, were already driving growth in contactless payments. One of the most important factors is the increase in the number of contactless-enabled terminals globally. In China, by far the largest payment card market, the government’s mandate for terminal upgrades has had a significant impact on the adoption of contactless card payments.

Contactless journeys

The number of contactless cards is increasing worldwide but different countries are at varying stages on the path towards universal contactless issuance. Despite the first contactless cards appearing in the UK as far back as 2007, they are relatively new in countries such as Indonesia and Argentina. Asia-Pacific is by far the largest region in terms of the number of contactless cards, accounting for 83 per cent of the global total in 2018, with China again leading the pack. Western Europe has the second-largest number of contactless cards, with some countries ahead of others – in Greece, for example, almost all cards have contactless functionality and most transactions are of the tap-to-pay variety, with customers only touching the terminal to enter their PIN when they exceed the €50 limit.

In North America, there are differences between Canada and the USA; whereas Canadians are among the most enthusiastic adopters of contactless globally, consumers in the USA have been slower to embrace it, with contactless card issuance lagging. In 2018, contactless accounted for just five per cent of all issued cards in the USA. However, as the COVID-19 pandemic has spread and consumers and merchants seek quick and low-contact ways of paying, the number of contactless payments in the USA is surging and most of the big card issuers there are actively rolling out new contactless cards to customers.

Upping the limit

Contactless payments have typically been used for lower-value purchases, such as drinks and snacks, and, as a result, have been displacing cash at the point of sale. In order to prevent fraud on stolen cards, contactless payments are subject to a spending limit, although contactless mobile payments often have higher limits than those made with cards, as they involve additional security such as a fingerprint, facial scan or a PIN keyed into the device.

The COVID-19 crisis has seen the raising of the contactless limit in a number of countries to facilitate quicker and easier payments, for example from £30 to £45 in the UK and from C$100 to a very generous C$250 for contactless credit payments in Canada. Research published by Mastercard in May this year revealed that 78 per cent of all transactions across Europe are now contactless, a significant rise driven by a decrease in the use of cash and an increase in the contactless spending limit. The rise in the contactless limit has clearly encouraged the use of contactless payments for higher-value purchases.

Change is here to stay

As customers become more aware of the convenience of contactless, and as acceptance grows, the number of contactless payments per card is increasing. The average number of contactless payments per card  was 12 per month in 2018 (up from nine in 2017), compared to 29 payments for cards overall. Contactless has the advantage of a shorter transaction time, which is particularly useful for payment on public transport. In countries such as the UK and Australia, the ability to use tap-and-go cards on public transport is a keen driver of contactless use.

While we have seen some shift to contactless over the last few years, there is no doubt that the pandemic will quicken this trend: 43 per cent of respondents to the Mastercard survey stated that they have used contactless payments more often since the crisis started. Consumers who already have contactless cards will use them more often as behaviour born out of necessity becomes ingrained.

Increasing demand from both consumers and merchants alike is expected to accelerate the issuance of contactless-enabled cards and the upgrading of card terminals.

The COVID-19 pandemic has shone a spotlight on the benefits of contactless as a resilient payment channel, enabling quick and safe payments at the point of sale at a time when social distancing is a must. Consumer preference for more convenient payments will persist long after the current crisis subsides.

In RBR’s latest report Global Payment Cards Data And Forecasts To 2024 for the worldwide payment cards market consists of an executive report and database. It is the first of its kind to provide  comprehensive and consistent market data and five-year forecasts for 65 countries. The study includes bank cards, T&E (travel and expenses), private-label, co-branded and affinity cards, with substantive analysis and commentary.