Turns out contactless payments were a lot more than a pandemic solution.
They were in development as early as 2008, but what began as a public health measure in mid-2020 has evolved into a transformative force in the payments industry, impacting cards, digital wallets and other tap-to-pay technologies.
As consumers and businesses alike embrace the new post-pandemic life of contactless payments, PYMNTS gathered two executives from the payments industry to explore its new frontier: Visa Senior Vice President and Head of U.S. Merchant Chris Baker and Bank of America Managing Director: Vendor, Third Party and Network Management, Sara Walsh.
“The pandemic certainly increased the use of contactless,” Walsh told PYMNTS. “I think it’s important to remember, though, back to October of 2014, when Apple Pay debuted. That really started contactless adoption. While some issuers had also already enabled contactless plastics, the usage was pretty low.”
One game-changer came with the adoption of contactless payments in public transit systems. Baker pointed out that cities have been driving early adoption, with more than 30 cities in the U.S. having contactless penetration over 60%. This trend is exemplified by New York City’s MTA system, where awareness created through contactless usage by millions of daily riders is contributing to 75% of face-to-face transactions being tapped in New York City. As both executives noted, as consumers become more comfortable with the technology in their daily commute, they’re more likely to use it in other contexts.
As contactless payments have grown, so too has the sophistication of fraud prevention measures. At the forefront of this evolution is tokenization, which not only enhances security but also offers additional benefits such as increased conversion rates for merchants and issuers and the ability for merchants to keep a card number on file.
Baker added that the underlying EMV chip technology, developed originally to combat card-present fraud, combined with NFC for contactless transactions, creates a formidable weapon to fight fraud. The technology also significantly reduces the risk of card skimming. As Walsh pointed out, “There’s no actual contact between the card and the terminal,” eliminating the opportunity for fraudsters to install skimming devices.
As contactless payments continue to evolve, both Walsh and Baker see exciting developments on the horizon. Walsh predicted a convergence between card-based and mobile wallet-based contactless transactions, which are currently heavily skewed toward card usage.
Perhaps the most intriguing development is the integration of biometrics into contactless payment systems. “I love being able to go into Whole Foods for example, and pay for my groceries with my palm,” Walsh said. “I think that that’s low adoption right now, but it’s certainly something that will take off and people will see it, they’ll get how cool it is and want to participate.”
Baker sees the future of contactless payments as “tap to everything,” envisioning a world where NFC technology is applied to a wide range of use cases beyond traditional payments.
As the U.S. market catches up to global leaders in contactless adoption, there’s still significant room for growth. The recent milestone of 50% penetration in the U.S., reached in June, marks just the beginning of what both experts see as an exciting journey toward ubiquitous contactless usage.
“I think in terms of some of the innovations, and where things go from here, this idea that we have this great NFC-enabled, safe, trustworthy, quick-to-use technology that we can now apply to all sorts of different use cases — tap to everything, if you will — that’s where we at Visa are really excited to take things,” he said. “We’re already seeing some things in the market. Others are in development, and there’s lots of other great ideas down the line.”
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