By Andre Sousa, Product Marketing Manager for SIMs & EMV cards at Valid.
Contactless Payment transactions keeps growing in (post) pandemic scenario
According to the latest reports regarding behavior towards payment transactions worldwide, and after two years of the pandemic and the massive introduction of contactless & digital payments, consumers are now more familiar than ever and choosing to use their contactless payment cards and wearables for day to day purchases.
After two months of the so-called ‘Freedom Day’ in the UK, the findings of the UK research, commissioned by Samsung Pay, suggests that the nation has potentially reached a ‘tipping point’ in how consumers choose to pay for their goods.
The country has embraced digital forms of payment in recent years with nearly half (46%) of respondents saying they were more willing to pay digitally at the peak of the lockdown in 2020.
Even as stores reopened in 2021 with more stringent health and safety measures, we’re seeing an even greater shift towards more low contact, contactless and mobile forms of payment.
By giving individuals the ability to turn their smartphone or smartwatch into a digital wallet that contains credit, debit and loyalty cards for use virtually everywhere contactless is accepted, it has opened a whole new world of possibilities and convenience to users.
Strong trends for the European market present growth in the adoption of contactless and mobile payments despite the ongoing discussions regarding local autonomy of national digital currencies and other new types of payments. Statistics show most users prefer to continue using their contactless cards and mobile wallet, creating even more uses cases for these new practical payments solutions.
Contactless payments are now also a solution for the worldwide chip shortage that is significantly impacting the banking and payment industry. The volume of plastic card issuance has been drastically reduced due to this ongoing scenario. As a result, new contactless payment methods naturally became more prominent as a means for continuous transactions business growth. The world has a long history of being dependent on plastic payment cards; however, the tide is beginning to turn. Physical payment cards can be seen as inconvenient compared to their digital counterparts and some customers prefer to receive less plastic from their banks.
Additionally, we also see regions like Germany, Austria and Switzerland reaching the tipping point when it comes to contactless payments, as presented below:
Nets Group has published new data on contactless payment transactions in the DACH region. This region, heavily reliant on cash and invoicing until recently, has experienced a dramatic transformation in contactless adoption over the last two years as a result of the pandemic.
In June 2019, overall contactless adoption in the DACH region was at just 40%. This number rose quickly to 71% by June 2020 and by June 2021, more than three quarters of cashless transactions in Germany, Austria and Switzerland were contactless. The average contactless rate is now 77% in Germany, 82% in Austria and 80% in Switzerland.
“The pandemic has significantly accelerated a steadily growing trend in the DACH region,” said Robert Hoffmann, CEO of Nets Merchant Services. “It was inevitable that Germany, Austria and Switzerland would ultimately achieve high levels of contactless payment adoption, but without this catalyst, it would have taken years to reach where it is today. An increasing number of merchants here are now offering and actively encouraging tap-and-go, which is becoming the norm for consumers.”
High levels of overall contactless adoption have been seen in other regions around the world as well, confirming the new habits adopted by consumers. In regions like the USA, adoption rates are lower but steadily climbing. According to Mastercard Contactless Consumer Polling, more than half (51%) of Americans are now using some form of contactless payment, which includes tap-to-go credit cards and mobile wallets like Apple Pay. Physical payment card usage remains prevalent, however, due to consumers’ familiarity with a tangible payment method. U.S. Financial institutions are turning to specialty cards made with recycled PVC and metal as an opportunity for brand promotion.
How can financial institutions take advantage of these new consumer habits with contactless payments?
The payment industry is facing drastic changes and to maintain a competitive edge in the means of payments sector, banks and financial institutions must innovate and prioritize the digital transformation, customer experience, and the convenience contactless payments allows for their users.
Capgemini World Payments 2020 report predicts a CAGR of 12% for global non-cash transactions (2019-2023), driven by an improvement in speed, convenience and excellent customer experience. The reports also stated that digital wallet users is supposed to increase from 2.3 billion in 2019 to 4 billion by 2024.
Valid has a strong position providing tailored solutions that integrate traditional and emerging technologies to enable secure, trusted experiences. We see that traditional payment cards are part of a consolidated market and that digital payment methods are gaining traction by the minute. Valid has the expertise to help you set up the most assertive strategy when it comes to a complete solution for your payment methods, combining traditional & specialty payment cards with contactless technology and mobile payments to deliver a safe and convenient experience to your customers.
Valid Transaction Solutions provide unique, secure, and innovative solutions to your customers who require a trusted partner. Valid delivers complete end-to-end solutions tailored to meet your needs and differentiate your brand in a world of evolving card program requirements. Consult with our experts to learn more.