What Will The Arrival Of Contactless Payments Bring?

Major cities are rolling out contactless payment solutions for services like mass transit, and contactless cards might come next. Will it be a passing fad or a dominant payment form?

 
 

EMV was just the beginning.

For the past several years, financial institutions and merchants have worked to ensure the hardware and software behind card payments complied with EMV requirements. They’ve mailed new cards and installed new POS systems.

At a high level, EMV was supposed to establish an interoperability of card payments between the United States and the rest of the world and reduce fraud at the point-of-sale. On both accounts, the rollout has been a success.

At Visa, the rollout provided the promise of something more.

 

 

For three weeks in July 2018, the payments technology behemoth ran a pop-up innovation center in Washington, DC, a short-term test drive of a concept that already has 10 full-time locations in major cities across the world (including London, Dubai, New York, Miami, and Moscow) with the express purpose to educate consumers about the cool new world of contactless payments: quicker shopping, faster commuting, and more.

Contactless payments, said a Visa associate during a media preview to which CreditUnions.com was invited, “are the future.”

Contactless payment terminals can help consumers checkout faster. Photo: Visa.

As part of the preview, Visa prompted attendees to test the technology at several stations that provided well-designed use cases for contactless payments: remembering to go to the grocery store while out on a run; ordering ahead to quickly pick up snacks before a child’s soccer game; riding public transit without a separate metro card.

A user can enable these payments through their smartphone, of course, but Visa also talked about the coming distribution of contactless plastic credit cards that users can wave over POS terminals. Distributing these cards will likely not cause the same headache as EMV cards because there is no compliance shift deadline. Plus, sending contactless cards by request or as current cards expire can provide a value-add to experience.

Contactless payment cards are already common in Europe and will soon invade the states, Visa associates said. In the U.K., for instance, 34% of card transactions are contactless, according to June 2017 numbers. Chicago’s mass transit system already accepts contactless payments, and New York, Boston, and Miami’s mass transit systems will accept contactless payments by 2019. DC’s metro will have mobile-only contactless capability by that time, too.

As consumers hear more about contactless, and then start to use the technology, Visa’s associates are confident widespread consumer adoption will quickly follow.

Soon, major cities like New York, Boston, and Miami will have contactless payment capabilities for mass transit. Photo: Visa.

That’s because, largely, the hardware to accept contactless payments at the POS is ready. The POS terminals merchants have adopted in the wake of the EMV shift have contactless capability. They just need a software upgrade — and consumers need new cards.

Contactless payments might usher in a new era of retail, too, Visa says.

At the innovation center, Visa set up a World Cup-themed soccer goods store, enabled with radio-frequency identification (RFID). RFID is trained to recognize store inventory. So, after we walked into the store, grabbed a soccer ball off the shelf, and scanned its RFID tag at a self-service terminal, a screen showed us an image of the item we were purchasing and prompted us to authenticate ourselves using a payment account we had stored at the retailer. Common ways to authenticate these purchases are iris scans, voice recognition, and even vein scans.

Gaining adoption for a new form of payment is no small thing, just ask mobile wallets. According to a 2017 Forrester study, 16% of U.S. consumers have used a digital wallet but only 15% preferred using them and 46% of those surveyed preferred paying with credit cards.

It remains to be seen whether contactless will become the dominant form of payment or, like mobile wallets, just another form. But if Visa’s pop-up center is any indication, you’ll hear a lot more about it.

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July 25, 2018


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