First there was the magnetic stripe. Then there was the EMV chip. Now, banks will push another way to pay: tap-and-go.
Today, just 22% of credit card companies offer contactless cards in the US market, mostly in select portfolios. But 67% of card issuers plan to introduce contactless cards within the next few years, according to new data from Auriemma Consulting Group.
The surge in market adoption comes as contactless payment technology has become more widespread. Most merchants now have card readers capable of accepting contactless payments, and New York City is getting ready to modernize its subway system with contactless fares. Issuers are now following suit.
“Banks are always looking for ways to make paying more convenient and frictionless,” said Anita Solaman, Director of Auriemma’s Credit Card Chief Executive and Debit Management Roundtables. “Contactless payments are faster and easier than a dip or a swipe.”
Faster and easier checkout has helped the technology quickly gain traction in the UK, Europe, and Canada, where contactless payments make up 40% of face-to-face transactions, according to Visa.
Many markets have achieved 50% contactless penetration within two years. That means US issuers can expect to see strong adoption as they gradually introduce contactless cards in their reissuance strategies.
In addition to an improved customer experience, the slow pace of mobile payments adoption is also driving interest in contactless. While Apple Pay and other mobile wallets were expected to “leapfrog” contactless plastic cards, adoption has been gradual. Contactless payments, which use the same near-field communication (NFC) technology, could help spur adoption. Contactless has proven popular for small-dollar purchases and could steal market share away from cash if consumers find it more convenient.
The migration to contactless carries some risks for credit card companies. Contactless cards are significantly more expensive to issue than EMV chip cards, and many consumers are still unfamiliar with the technology. In fact, according to Auriemma’s Mobile Pay Tracker consumer research study, a considerable share of consumers will not attempt a second contactless transaction following an error on the first attempt. Issuers are planning consumer education campaigns to avoid these pitfalls.
Still, contactless cards are expected to be popular.
“Giving consumers more options to pay is a good thing,” Solaman said. “If other markets are any indication, contactless should quickly take off in the US.”
For more information, call Anita Solaman at (212) 323-7000.