In the UK, card payments have overtaken cash payments and now account for more than 50 percent of all retail purchases, of which 30 percent were contactless. Other countries are seeing similar adoption increases for contactless payments. The one significant exception has been the US market—but that’s about to change.
For the past few years, card issuers and payment companies operating in the US have spent much of their time and resources on EMV updates to their infrastructure. While contactless payments were being adopted in other countries, the US market, for the most part, put the initiative on the back burner. Some adopted a quasi-contactless strategy by getting into the mobile wallet game.
In the years since the EMV liability shift, the US payments ecosystem has had time to settle in. EMV adoption has seen a steady rise in the US. At the same time, mobile wallets, which once held so much promise, have struggled to gain much traction due to clunky user experiences and a lack of general awareness among end users. Additionally, US payment companies have had a chance to see how popular and effective contactless payments have become in other markets.
As a result, issuers are now pushing for more contactless cards to be placed into circulation. What at one time was an unclear ROI for contactless cards is now proven and makes financial sense to pursue. The simple user experience of “tap and go” removes friction at the point of purchase and aligns perfectly with a retailers’ desire to create better in-store shopping experiences.
What to expect in 2018
As chip cards issued in 2014 and 2015 begin getting replaced this year, the new cards will most likely be contactless. In fact, according to ABI Research, US contactless card shipments, which numbered 25.7 million in 2016, are projected to surge to 229.6 million in 2021.
The new cards will rely on a dual-interface chip that allows cards to be dipped (using the card’s chip) or tapped (using the card’s embedded RF antenna) at compatible payment terminals. For those merchants who have already upgraded their payment terminals for EMV (many small ones still have this bridge to cross), the terminals most likely are technically capable of accepting contactless cards.
Each issuer will set limits for “tap and go” contactless transactions popular among users. In the UK and Canada, tap and go is popular for mass transit and ticketing applications where shortened transaction times make it the ideal payment solution to keep queues moving. Most often, tap and go limits are set below $100. In the event of a larger purchase, users are prompted to enter a PIN to secure the transaction.
How ISVs can prepare for contactless payments
The payments space continues to be a hotbed of innovation and creative solutions, and contactless is the next wave of payment technology coming to the US beginning this year. Unlike the US EMV rollout, there’s no lack of direction or confusion when it comes to contactless so there’s no reason to wait. ISVs and payment devices manufacturers who prepare now will be well-positioned to serve existing customers and potentially steal market share from competitors lagging behind.
Creditcall is a UK and US-based company with years of experience with contactless payments. Our payment gateway and contactless EMV Level 2 Kernels are ready for ISVs and payment device manufacturers in the US market today. If you’re an ISV looking for a fast and easy solution to contactless all your payments-related needs, give us a call today.