Digital Banking

COVID-19: The contactless payment catalyst?

Is COVID-19 at the core of contactless payments or were global trends heading that way? Daniel Kornitzer takes a look at what is changing the payments landscape.

photo provided by iStock

June 12, 2020 by Daniel Kornitzer

The U.S. payments landscape has faced several hurdles when it comes to contactless adoption. But while the growth of contactless payments in the country has been slow, it is expected to gain increased traction through 2020 due to the proliferation of contactless-capable point of sale devices, the availability of contactless cards and the growth of mobile wallet options. On top of this, the launch of new large-scale use cases, such as New York City's contactless subway, are creating more consumer interest in contactless payment methods.

The momentum behind adoption has been given an additional boost as COVID-19 quickly became a disruptor across the payments landscape and caused a sharp acceleration in the use of contactless payment methods. The more the pandemic raged, the more this marked shift in consumer behavior showed its potential to have a long-term impact. Unexpected health and safety concerns heightened during the pandemic, such as possible safety risks around physical interactions with cash and chip-and-pin card machines.  

Many consumers turned toward contactless payment options like smartwatches, mobile phones and contactless debit and credit cards to avoid spreading or contracting the virus. In May, 50% of U.S. consumers reported using contactless payment methods at least four times, with 69% agreeing contactless payments were more convenient than cash. In fact, many stores are encouraging customers to use contactless as much as possible to reduce the virus' spread.

Research also suggests this shift in favor of contactless is likely to create a sustainable change in attitudes, enduring long after all the restrictions tied to the pandemic have been lifted. In fact, company research showed 60% of U.S. consumers said using contactless during the pandemic has made them more comfortable with the idea of using the payment method in the future, which is a sentiment with the potential to trigger a domino effect for contactless adoption in the U.S.

Contactless shift compounded by 5G networks

Also poised to further transform the payments landscape is 5G technology, which is expected to come to fruition in mobile networks later this year. By eliminating connectivity issues across the transaction process, 5G will help decrease time between when a payment is made and the confirmation of that payment for consumer transactions. This increased speed and connectivity will better facilitate digital payment methods, improve the consumer experience and lead to yet more adoption of contactless methods.

Mobile wallet usage on the rise

Global consumer data from 2018 also shows that those currently adopting mobile payments technology (84%) overwhelmingly prefer it over cash. A further three quarters (77%) agree that mobile wallets were more convenient than contactless cards, with 85% predicting they will be using mobile wallets to make payments in two years' time. The combination of mobile technology's growth and repeat usage during the pandemic could cause these frictionless methods to be further normalized among U.S. consumers. Combine this mobile wallet use with the rise in other contactless methods, and we may find consumers even refuse to shop where contactless payments aren't accepted in the future, not just because of public health concerns but new preferences.

Point of no return?

With all of this momentum for contactless, it's no surprise that 57% of U.S. consumers said that using contactless during the COVID-19 pandemic has made them more comfortable with the concept of a cashless society. As connectivity improves and product and infrastructural groundwork evolve in the U.S., consumers may well look to contactless permanently for a new and improved user experience.

About Daniel Kornitzer

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In his role at Paysafe, Daniel is responsible for developing strategic partnerships designed to meet customer needs and grow new revenue. He has over 20 years’ experience in technology management. Daniel holds a B.Eng in Electrical Engineering from Montreal’s Ecole Polytechnique, a M.Eng from McGill University and a diploma in Network Engineering from the University of Toronto.

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