Contactless Payments - Their Day Has Finally Arrived!

Written by Susan Foulds, Managing Director

As the COIVID pandemic causes workers in the U.S. to either lose their jobs or shift to working from home, the types of products and services consumers and small businesses will need are also altering. Retail and point-of-sale (POS) transactions are already changing as well.

As an early adopter of public health etiquette who has knuckled elevator buttons and gas pump keypads for years, sports chapped hands from frequent hand washing, and eschews payment touch screens, I appreciate why the public is now casting a fresh eye on issues associated with exchanging money and using cards at the POS. One of the most obvious payment changes will involve the elimination of touch pads and screens for card POS transactions—these will finally give way to NFC (near field communication) contactless cards and mobile digital wallets.

NFC is short-range wireless communication between the consumer device, like a card or mobile app, and a compatible retail POS payment terminal for credit and debit cards. The retail customer simply taps or waves the NFC card or device to make their payment. Vendors like Square also offer contactless payment terminals with additional features, such as emailing a receipt.

Changing consumer payment habits in the U.S., however, has historically been challenging and slow (look at online bill payment in 2000 and checks still today), although Peer-to-Peer (P2P) with third-party fintech apps and the bank-owned Zelle platform has shown more rapid adoption recently. And NFC contactless POS payment technology has been available with limited adoption for some time—largely due to conversion cost of the card terminals at retail locations; the pandemic will likely now give it the momentum needed for widespread adoption. 

As this article heads for release, some credit card issuers are starting to notify their cardholders that new NFC contactless replacement cards are being issued; Citi is one in the forefront, sending NFC cards to customers in April and May 2020—well before the current cards’ expiration dates. Chase is another issuer that has led in actively promoting contactless payments the last couple of years to drive NFC adoption. Some retail businesses are also quickly announcing the rollout of contactless payments in their stores.

Most smartphones today also have NFC chips and can be used as digital wallets to make card payments using options like Google Pay and Apple Pay with cards stored in the app, including prepaid or retail gift cards. In China, the public China-T transportation system is rolling out Apple Pay for contactless transit fares, and New York City is moving ahead with an expansion of contactless pay for its MTA subway stations and buses; Boston and San Francisco are also expected to rollout in the near future contactless payments via mobile phones for public transportation fares.

Well before the pandemic, several banks—including Bank of America, Chase, Fifth Third, PNC and Wells Fargo—had already rolled out contactless cash withdrawals with debit cards or mobile apps at some of their ATM locations (Keynova Q1 2020 Mobile Banking Scorecard). Most of the current NFC-enabled ATMs are located in large metro areas, enabling bank customers to hold up their ATM card or mobile app to the ATM reader to make a withdrawal. In some cases, the withdrawal amount can be pre-set through online or mobile banking.

The widespread prevalence of  cards and mobile phones with NFC chips positions the payments industry and brick and mortar retailers to quickly respond to “the wave” of contactless payments—retail stores, both large and small businesses, need to acquire the NFC compatible terminals to make it happen.