Since the first mobile devices were enabled with contactless capabilities nearly a decade ago, contactless payments have been gradually gaining acceptance in the U.S. While early adoption has been led by younger consumers, the global COVID-19 pandemic has caused consumers of all ages to rethink the ways in which they pay, fueling even more rapid growth in contactless payments.  Consumers are engaging in social distancing and focusing on their safety; they are more comfortable if they don’t have to touch cash or even keypads, so it’s not surprising to see them embracing contactless payments now more than ever.

To discuss the growth in contactless payments and how credit unions can best position themselves in the market, PaymentsJournal sat down with Jeremiah Lotz, Managing Vice President, Digital Experience & Payments Products at PSCU and Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group.

PaymentsJournalIt’s Time for Credit Unions to Embrace ContactlessPaymentsJournal It’s Time for Credit Unions to Embrace ContactlessPaymentsJournaljQuery(document).ready(function ($){var settings_ap32884206 = { design_skin: "skin-wave" ,autoplay: "off",disable_volume:"default" ,loop:"off" ,cue: "on" ,embedded: "off" ,preload_method:"metadata" ,design_animateplaypause:"off" ,skinwave_dynamicwaves:"off" ,skinwave_enableSpectrum:"off" ,skinwave_enableReflect:"on",settings_backup_type:"full",playfrom:"default",soundcloud_apikey:"" ,skinwave_comments_enable:"off",settings_php_handler:window.ajaxurl,skinwave_wave_mode:"canvas",pcm_data_try_to_generate: "on","pcm_notice": "off","notice_no_media": "on",design_color_bg: "111111",design_color_highlight: "ef6b13",skinwave_wave_mode_canvas_waves_number: "3",skinwave_wave_mode_canvas_waves_padding: "1",skinwave_wave_mode_canvas_reflection_size: "0.25",skinwave_comments_playerid:"32884206",php_retriever:"https://www.paymentsjournal.com/wp-content/plugins/dzs-zoomsounds/soundcloudretriever.php" }; try{ dzsap_init(".ap_idx_88085_12",settings_ap32884206); }catch(err){ console.warn("cannot init player", err); } });

Trends in Contactless Payments

The chart below compares credit card and debit card payment options for contactless payments. The survey of over 3,000 consumers, conducted late last year, shows a slight preference for credit cards over debit cards in contactless transactions. “We find that wealthier individuals are more apt to use contactless and wealthier individuals are also more likely to use credit cards,” explained Grotta.

More recent statistics from Mastercard and Visa reflect the impact COVID-19 has had in the contactless arena. At the onset of the pandemic, Mastercard found that contactless transactions grew twice as fast as non-contactless transactions at grocery and drug stores, which were, of course, deemed essential and thus allowed to remain open throughout the nationwide shut downs.

Visa indicated that its contactless card and digital wallet usage was up 150% since March of 2019. It also noted that, “The U.S now has the most contactless cards of any market globally at over 175 million.”

With increasing consumer demand, there has been an increase in both the issuance rate and merchant acceptance rate of contactless products. Virtually all new POS systems are contactless enabled and businesses large and small are coming onboard. Digital transactions are not only being used in place of credit card transactions, but are starting to replace cash at the POS. Early adopters are getting into the habit of tapping and paying.

The digital shift encompasses more than just POS transactions.