The idea of contactless payments is still pretty foreign to a lot of Americans. There are a number of reasons for this but I’ll point out a few. Although contactless payment technology has been around for a while now, it only really gained widespread acceptance after merchants moved to accept chip-based transactions.
Secondly, the rollout of NFC-enabled cards has been slow, and even when consumers received them, many did not know that they have a card capable of tap and go. There are other reasons, but I don’t want to bore you.
All that said, the U.S. is a bit of an anomaly with regard to contactless card use. Consumers in many other countries are happily tapping away to their hearts’ content. Countries like Canada, the U.K., and Australia come to mind first.
I read an article from Australia this morning that talks about the impressive growth of contactless and digital wallets. The article is from Bankingday.com and covers the increase in the use of cards largely at the expense of cash. Increasingly, these card transactions are being made via contactless. As the article mentions:
The RBA said one of the most notable developments was the big increase in contactless card payments. The share of in-person payments made by tapping a card terminal increased from 10 per cent in the 2013 survey to 50 per cent last year.
Contactless technology has facilitated greater use of cards for low value payments. The share of in-person payments of $10 or less that were made with cards rose 20 percentage points over three years to 51 per cent.
The use of mobile phones and other payment-enabled devices to make contactless payments grew over the three years but such payments still only accounted for 5 per cent of in-person payments.
There a few things to unpack from this. First, the increase in contactless use by 40 percentage points since 2013 is pretty remarkable (if my math is correct, that’s a 31% CAGR). While we have gotten off to a slow start here in the U.S., it does show that consumers are willing to adopt this technology.
Secondly, as consumers in Australia have learned about the convenience of tap and go, they have started using it for lower ticket items that were traditionally dominated by cash. We are starting to see cards taking share away from cash world here in the U.S.; the increased use of contactless will only continue this trend.
Lastly, it is interesting to note that the growth of mobile devices to pay for things hasn’t caught on as one might have expected given the growth of contactless in general. I find this very interesting. What is it about the move to using a smartphone that is holding people back from what seems like the next logical step from a contactless card to a phone or other smart device?
Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group