Contactless payments have evolved over the years and consumers are starting to leverage this technology for everyday transactions. As this trend gains momentum, and shoppers are leaving their wallets at home and paying exclusively on their phone – you may be wondering what the current state of contactless payments is, and whether your business should take contactless payments.
Let’s dive in.
What are contactless payments?
Contactless payments integrate NFC (near field communication) technology into chip-enabled credit and debit cards, enabling shoppers to pay with their smartphone without any contact between the POS and their smartphone, bank card, or key fob.
How do they work?
NFC is a radio-frequency that uses a wireless radio antenna to communicate the card with the POS. The card is powered wirelessly by proximity to the POS (up to 4 cm), to ensure accurate and quick payments.
Is this trend worth paying attention to?
Contactless payments, specifically, global mobile wallet spend is expected to rise nearly 32 percent this year to $1.35 trillion, according to a new Juniper Research study. While today’s US adoption has been slow, industry experts expect a jump in consumer adoption; Business Insider projected the number of mobile payment users to be 150 million by 2020. With consumer industry titans like Apple, Android, and Samsung leading the charge in mobile wallets, industry experts expect to see a quick adoption of Mobile Wallets and NFC technology. In fact, Apple Pay alone reports a growth of one million new users per week.
Who is using contactless payments?
Consumer adoption of contactless payments in the US has been slow, but other parts of the world paint a different picture. In the U.K one in 10 card transactions are contactless, in Australia 66 percent of Aussies understand they have a card that allows them to tap and pay, and in Canada 75% of retailers accept contactless payments.
In addition to the geographic differences in contactless adoption, there is also a major generational gap. About 45% of millennials have made a contactless payment, and in contrast, just 26% of adults 35 and older have done so. As the younger generations’ buying power becomes more influential, this is a good indicator of the fate of contactless payments. Millennial are looking for more flexibility and mobility in payments.
How do customers benefit from contactless payments?
The convenience of contactless payments is the driving benefit for customers. Smartphones allow customers to stay connected, access the Internet, get from place to place, among many other things, so why shouldn’t they then be used as a way to pay? Without having to rummage through their purse, worrying about forgetting their wallet – customers can pay on the one thing they never leave the house with, their smartphone.
Additionally, the increased security is both a benefit to the customer and the merchant. The enhanced security from chip technology has shown a drastic reduction in credit card fraud. Mastercard found that over a year period, there has been a 54% decrease in counterfeit fraud costs at retailers who either completed or are close to completing EMV transitions. Because contactless payments are PCI compliant and have the EMV chip integrated, customers have peace of mind that their credit card information is safe and secure. And businesses can be assured that by accepting EMV enabled payments, they can avoid chargebacks and maintain a good reputation with their customers.
How does business benefit from contactless payments?
By adopting the latest in payment technology, you aren’t just future-proofing your business, but meeting the demands of today’s digital-savvy customer. Contactless payments are quicker than traditional forms of payments, so you can keep lines shorter, process more transactions, and keep your customers happy.
Another benefit to businesses is that contactless payments decrease the ‘pain of paying’ for customers. Given the ease and convenience of using mobile wallets, a study by Mastercard showed consumers may spend up to 30 percent more with contactless payment methods than with traditional credit cards.
So, should your business accept contactless payments? If you want to drive traffic, see happier customers, and never lose out on a sale – be the payment flexible business. This means design your store to accept multiple different types of transactions, including contactless payments. And with 50% of regular shoppers canceling their purchases if their preferred payment method was not available, get your business set up today to accept this growing form of payment.
With Revel’s payments features, you can provide your customers flexible payment options. Learn more about what an integrated POS and payment processor can do for your business.