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In the New Year, It’s Time to Go Contactless by Jim Johnson
December 11, 2018
Jim Johnson, FIS | Head of Financial Institution Payments
Ready or not, 2019 will be the year of tap-and-go for cards
During my career, I’ve heard many predictions around new technologies and trends. Some pan out. Some don’t, and momentary hype sometimes leads to disappointment in the face of market realities. In fact, that happened with the initial introduction of contactless card technology more than a decade ago. The concept was sound, but ahead of the market.
As discussions about contactless technology once again rise to the forefront, industry pros ask “What’s different now?” The answer is: “A lot!” Look at what the big banks are doing. All top 10 are moving forward with plans to issue contactless EMV cards. What do they see that others may be missing? Let me break it down.
Consumers want to end their suffering at checkout
One reason for this unanimous push is that consumers are ready for a more convenient, faster way to pay at point of sale. The advent of EMV a few years ago resulted in longer lines at POS terminals, which caused significant cardholder frustration. Plus, dipping the card is cumbersome – a step backward from the ease of swiping. At the same time, consumers are becoming comfortable with the tap-and-go experience of mobile payments – a step forward in removing friction.
Retailers also want to end their suffering at checkout
POS terminal suppliers and retailers have been busy upgrading and enabling NFC capable terminals in response to the EMV mandate. In fact, nearly all POS terminals shipping now are NFC-capable. Most important, top retailers are leading the charge and turning on their NFC technology:
- 70 percent of high-volume retailers now have the hardware in place. This includes quick-service restaurants, drugstores, convenience stores, warehouse clubs, and supermarkets.
- Nearly half of all in-person Visa transactions occur at contactless enabled merchants and by the time you read this, it’s likely to exceed 50 percent, because it’s moving that fast.
The future demands that we keep reducing friction
High adoption rates abroad prove that consumers are ready for the contactless experience. Why? Because it’s a more convenient way to use their familiar and favored form factor for payments. It’s a spectacular bullseye in terms of improving the cardholder experience in a boldly simple way. We see:
- Transit systems across the country getting onboard with contactless payments systems
- Travelers from the United States requesting contactless cards from issuers as they visit a growing list of countries around the world such as Canada, the United Kingdom and Australia where contactless cards are already firmly established
Issuers have a dual opportunity
The dynamic that makes this shift so compelling is that it is double-barreled, with both risk and opportunity. Issuers risk a great deal in doing nothing as the market shifts. At the same time, issuers stand to gain significant lift in their card portfolios by moving forward.
It’s my view that the argument for issuers to adopt is compelling and it is also a chance for issuers to do more than protect portfolios. It’s a chance to grow in a rare and disruptive moment for cards. How? Contactless shifts cash to card in a big way. Transaction volume typically increases up to 30 percent while the cost of handling cash declines significantly.
It’s time to talk about going contactless
As you evaluate your card strategy for 2019 and beyond, lean on all of the resources you have available to decide your best approach to issuing contactless EMV cards.For example, some financial institutions are issuing contactless cards as current ones expire. Others are issuing contactless cards in particular geographies or to specific customer groups such as frequent overseas travelers.
Contact your processor to discuss the best way for your organization to leverage the contactless opportunity.