The first contactless card was introduced in the UK ten years ago on September 10 and today 33% of all UK card payments are made on a contactless card.
This almost doubles last year’s figure of 18%, but it is not expected to stop here as western retailers take inspiration from Asia’s booming mobile payments industry.
Lu Zurawski, solutions practice lead, consumer payments at ACI Worldwide, says the impact of contactless payments “will go far beyond the world of plastic cards; it really is the beginning of an era of mobile payments where consumers feel comfortable waving smart phones or wearable devices like watches or rings to initiate their payments.”
“It seems inevitable that a shift to contactless universal payments is now well established. If current adoption rates continue, mobile contactless will reach 3 billion transactions in 2020,” says Zurawski.
This would be the same volume as card contactless in 2016 – an impressive catch up if this is sustained momentum.
Recent data from social money transfer app, Moneymailme, says that 62% of British 18 to 25-year-olds (Generation Z) feel frustrated if they are forced to make purchases with cash and 38% of Generation Z think cash will be dead within 15 years. Nearly half of Generation Z (49%) give friends up to £10 at least once a month but more than one in five (22%) wouldn’t use a bank transfer for less than £10.
“Transaction volumes for contactless usage are dwarfed when compared to the figures of (predominantly Chinese) mobile payments users who use optical bar code scanning techniques within schemes like Alipay and WeChat Pay”
Mihai Ivascu, CEO of Moneymailme’s, says: “This generation of young people has grown up with mobile technology and for many of them using cash seems like a very dated concept, especially with the range of alternatives available to them. In 2015 electronic payments overtook cash for the first time in the UK and as this generation gets older this trend is only going to continue until producing physical cash is no longer desirable.”
Contactless payments are not only easier to use than Chip and Pin, they are in many ways more practical than small change and small notes.
Ian Bradbury, chief technology officer for financial services at Fujitsu UK and Ireland, notes: “The significant parallel growth in debit card transactions also suggests that this is not just growth fuelled by debt and easy credit – much of this increase will be a result of contactless payments being made purely due to ease.”
Contactless is fuelling futurist payments
Contactless payments also have the added value of fuelling other payment solutions such as Apple and Google pay and other wearable technology – which can’t be done as easily with Chip and Pin.
Zurawski says: “It is tempting to think that debates about consumer payment techniques and standards may now be ‘done and dusted.’ For all of our familiarity with contactless here in the UK, the transaction volumes for contactless usage are dwarfed when compared to the figures of (predominantly Chinese) mobile payments users who use optical bar code scanning techniques within schemes like Alipay and WeChat Pay.”
In November 2016, Chinese messaging service WeChat reported 846 million users per month, a 30% rise year-on-year and Cartier, British Airways, Coach and Burberry are all already selling products on WeChat digital stores and some are considering hosting WeChat Pay in Europe.
In 2015, China saw mobile payment reach 5.633 billion transactions totaling RMB 23.46trn ($3.52trn), according to the People’s Bank of China. McDonald’s reported 30% customers making payments using WeChat in 2015, the top payment option along with cash payment (30%) and followed by Alipay (21%).
As more and more Chinese are travelling abroad, they often expect retailers to be familiar with their preferred way to pay and are deterred from sales when shop assistants respond with, ‘what is WeChat Pay?’
For this reason, high-value merchants across Europe and the US are currently weighing up the benefits of adding Alipay versus WeChat Pay to their ‘points of sale’, according to Zurawski.
US women’s fashion brand, Rebecca Minkoff, recently incorporated Alipay into its point-of-sale facilities online and in stores, for example.
“Despite their impressive volumes, I still doubt this will de-rail the progress of contactless. For many of us in cards markets, we are not keen on changing our habits and having to learn yet another new payment method. Nevertheless, the impact that WeChat Pay will have on developing markets should not be ignored,” Zurawski says.
Bradbury at Fujitsu, disagrees that consumers behavior is so static. “The success of contactless payments demonstrates that consumers are quick to adopt new payments solutions that focus heavily on improving the consumer experience,” he says
“However, because consumer experience can cover many aspects including convenience, security, speed and ubiquity, it’s vital that providers put in place ways to improve the experience over current solutions. If future payment solutions do not address all of these areas – which are fast-becoming a customer expectation – then they are unlikely to be successful,” he adds.
The contactless cone
The popularity of contactless and quick payments related directly to customers’ desire for more speed and convenience. Multinational credit card and payment provider, Barclaycard is currently demonstrating this with self-service, contactless ice cream vans to mark the 10th birthday of contactless. Customers will be able to pay for an ice cream using contactless and fill the cone up themselves, freeing up ice cream vendors to sell other ice creams to customers. This cuts queuing time by almost eight minutes.
Rupal Karia, head of commercial at Fujitsu UK and Ireland, says: “Our latest study found that 8-in-10 consumers would spend more with retailers that have a better technology offering to support the shopping process. That is why by bringing innovative new ways to change the way a store – or in this case ice cream van – functions, retailers can enhance the shopping experience to make it more interactive and seamless journey and boost customer loyalty along the way.”
Despite being behind the likes of Europe and China, the US payments industry is now rapidly advancing, said Anish Kapoor, CEO of AccessPay told GTNews in an exclusive interview.
Treasurers are more interested in cross-border payments and automation than real-time payments, as they are consistently asked to do more with less, argues Rick Burke, head of corporate payments at TD Bank in an exclusive interview.
#PSD2FinishLine recently started trending on Twitter. As the country slowly grows in excitement throughout the month of November, with the C-word on ... read more