There has been an evident rise in contactless payments since the pandemic, but the trend is here to stay, given the efficiency and effectiveness of going cashless and touchless. As more people and businesses welcome the change, technological innovations also match the pace to make payment processes more robust.
Most merchants that accept contactless payments also accept contact payments, often without requiring any action on the part of the customer. If a merchant does not receive confirmation through contactless payments, a shopper can still complete their purchase by swiping or inserting the chip at the point of sale (PoS) or simply signing and paying with cash. But this obstruction to a cashless economy needs to be taken care of sooner than later, as the five upcoming years are going to witness major consolidation that is predominantly consumer-driven.
The global contactless payments market cap was valued at $2.235 trillion in 2021, as per the GlobeNewswire. Contactless payment using NFC technology provides ample opportunities for retailers to enhance the overall shopping experience of consumers by offering them unmatched convenience and speed. Accepting contactless payments is seamless and cost-effective, as there are no additional hardware costs associated with it.
The Need for NFC Payments Beyond Pandemic
The tap-and-go contactless payment method utilizes radio frequency identification (RFID) technology. This payment method uses a similar radio-based data transfer to a traditional card swipe. However, they don’t require the user to physically insert the card into a reader or enter their PIN at checkout.
Contactless payments have been around since 2014, since the launch of digital wallets. But only recently have they become more widely used due to their speed and convenience. In fact, contactless-enabled cards were widely issued only after 2018 with the introduction of NFC in EMV cards. Shortly after that, there was the pandemic, which significantly increased the acceptance of contactless payments.
But the question is, does this technology still hold relevance after the pandemic?
And the answer is yes! The reason is straightforward—contactless payments offer unrivaled convenience and security.
The Rising Popularity of Digital Wallets
The advent of digital wallets is a primary reason for the heightened popularity of contactless payments. The adoption rate of contactless payments in the US was minimal for a long time. This is because credit card penetration was deep in the US economy, but the same was not the case in many parts of the world. Contactless payments via digital wallets gave people a unique value proposition without having to ramp up the supplies of physical cards.
Although slower than the rest, tap-and-go payments have picked up later in the US due to contactless payments. A 2021 report by Raydiant claims 80% of American users have used contactless mode of payment in a span of 12 months. As per Mastercard’s latest NPI (New Payments Index) survey, nearly 64% of the respondents would still prefer spending online in the next year by entering card details. This signals the need to holistically bring the benefits and rewards of offline contactless payments to online wallets.
Tap-and-go is the New Norm
Contactless payments are a great way to pay for small items, and the limit for contactless payment cards has also seen an extension recently. As the quantum of contactless payment cards is expected to cross 2.7 billion by 2023, the retailers have to be prepared for the changes too. They need to equip themselves with all-in-one payment devices to be able to accept not just contactless cards but various types of contactless payments. Tap-and-go is even more convenient for phones than physical wallets (with a contactless card in it). That said, the cashless economy is evolving exponentially, which calls for retailers to be ready for multiple payment gateways based on customer preferences.
Preparedness will pave the way for businesses’ success as contactless payments continue to expand. According to recent reports, 96% of those using contactless modes of payment will continue to do so post-pandemic. This means—store infrastructure upgradation is not an accessory but an essential part of the trade now.
Tokenization of Financial Information
The truth is that contactless payments are not as vulnerable as physical cards. Payment processors constantly innovate ways to make the process more foolproof, like adding 2-step authentication with biometrics or incorporating codes generated by apps such as Google Authenticator. The seamlessness is still higher than contact payments, making it an obvious choice. Depending on which card you have and where you are in the world—there are different rules about how much money you can spend using contactless payments, which is a good security feature, at least for now.
Not only do they offer improved security over magnetic stripe transactions, but contactless payment modes also have additional layers of protection in place. Hence, you know your information is safe every time you pay with a tap.
- Tap-and-go transaction times are faster than traditional payments despite having an additional step of approval that was missing in the contact cards. Plus, if your card is lost or stolen, contactless payment technology makes it easier to cancel a card before any misuse occurs. The card is majorly for identity verification, while the financial data stays encrypted.
- Contactless payments are more versatile than ever before. Now people can pay for public transit using their cards (which also means no more tokens or tickets) and use ride-hailing services without hassle.
Customer Experience (CX) is the Key
As a matter of concern, 67% of retailers falsely believe touchless payments cost them more. More awareness needs to be spread around the issue of fees charged at physical PoS, which practically remains the same. NFC payments are convenient because they allow you to make transactions without taking out your wallet or card.
Retailers should always stay customer-oriented and keep trying to simplify their shopping experience. Things like “unmanned checkouts” and “link to pay” go a long way when you can handle more customers and see them off happy.
Contactless payments aren’t going anywhere anytime soon, so now is the time to get on board with this technology and stay ahead of the competition.