A contributor to Forbes penned an article forecasting sweeping changes in the manner that U.S. consumers pay for small purchases at the point-of-sale. It has to do with the latest issuance of contactless cards. The author makes that argument that issuers are all on board because:
- Falling issuance costs. The cost to issue a contactless card has fallen precipitously in recent years thanks to economies of scale driven by international card issuers. Today, a contactless card should cost a financial institution less than $1 per card (and depending on quantity, often more than 20% less) compared to well over $2 years prior.
- Broadening merchant acceptance. The US EMV liability shift that occurred in October 2015 has helped catalyze the implementation of dual-interface (offering both contact and contactless EMV) PoS terminals. More than 60% of Visa’s US transactions occur today at a contactless-enabled merchant location. Further, more than three-quarters of the top 100 US merchants by transactions currently offer contactless as an option at checkout.
Note: Walmart and Kroger are two large merchants that are not taking contactless cards.
- Consumers’ continued love for cards. While contactless wallet options like Apple Pay have been available for several years, uptake remains modest, indicating that consumers still enjoy using their physical cards, and likely will for some time.
I would add that issuers are on board because of the promise of more card transactions resulting in more card revenue.
Will Americans go for contactless in a big way? This article says they will, based on what was experienced in Australia and the U.K. Certain venues like transit and drive thru locations offer a real customer experience improvement, but just as consumers here love their cards, the same argument could be made that consumers love their cash for certain transactions. It will be interesting to watch how merchants react when they begin to pay interchange on all those cash transactions. The structure of interchange or “swipe fees” is very different in the U.S. in comparison to the other countries that we are expected to emulate in out contactless card adoption.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisoy Group