The rise of contactless payments has transformed the way merchants and customers can transact with one another. This new payment system is both convenient for merchants and customers, as users can pay securely using their devices without having to physically interact with merchants. Customers can also enjoy attractive rates, with merchants likely to benefit from increased payment options as well. In addition, merchants no longer need to worry about managing cash or having sufficient change on hand, as contactless payments are cloud-based and digitalized.
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Data for today’s episode is provided by Mercator Advisory Group’s report –COVID-19: The Power Behind Contactless
Contactless Payments Will Likely Raise Rates for Merchants:
- Merchants will pay more for processing to meet customers’ needs for contact-free shopping.
- Routing to the EFT debit networks, which is often less expensive for merchants, is not always available for contactless transactions.
- Merchants will pay higher interchange rates for debit cards and assets in an e-commerce and CNP environment issued by smaller banks (<$10billion in assets) that do not have interchange regulated.
- If the U.S. follows the example set by Australia, Canada, and the U.K., then the use of cash will decline precipitously as contactless payments increase.
- Issuers will benefit from additional interchange income that merchants will pay in routing the transactions directly to the global networks.
- The Fed estimates that if 10% of grocery store purchases made in cash were converted to cards, $189 million in interchange income would be generated annually from this vertical alone.
- The onset of the coronavirus created the perfect storm that is driving awareness more quickly than all the promotional activities have to date.
About Report
COVID-19 has created consumer interest and use of contact-free payment experiences as fear of infection from surfaces, including a point-of-sale (POS) device, drives new behaviors. While reports and surveys proclaim cardholders’ interest in contactless technology, the actual number of contactless debit transactions authorized on a contactless card or mobile app remains elusive. This report, COVID-19: The Power Behind Contactless, considers the available market data and Mercator Advisory Group research to better understand the level of contactless payment activity and the degree to which COVID-19 is affecting its growth.
“The onset of the coronavirus created the perfect storm of events that is driving awareness more quickly than all the promotional activities have to date. Cardholders’ wellbeing is the incentive to adopt a new payment method. More consumers are now aware of the contactless capabilities they have on their debit card, which is driving new users in addition to increased use by current users,” comments Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group and author of the report.