Contactless payment is becoming a fundamental option for all businesses. As demand increases, payment companies are racing to make transactions more convenient for millions of merchants, according to a representative of Mastercard in the U.K. Enterprises and payment providers have been pushing for contactless payment. This option registered 40 percent growth internationally in the first quarter, according to the latest Mastercard international consumer polling.
The poll found that 46 percent of consumers had swapped conventional payment cards for contactless cards. The trend rises to 52 percent when confined to customers younger than 35. In February, Visa estimated 50 percent of its direct credit card transactions outside the U.S were contactless. Mastercard reported 25 percent worldwide. Both companies project the volume of contactless transactions will continue to grow. Conventional payment cards have been pushed aside to make room for contactless cards.
According to Visa, more than 100 million credit cards with built-in contactless ability have been issued in the U.S and 300 million would follow by the end of 2020. Tappit, which provides contactless technology like wristbands and apps connected to credit cards for sport and music events, has seen an increase in interest since the virus pandemic. The New York Times reported in July that the British payment company signed long-term deals worth £20 million in the past two months.
New York’s Metropolitan Transportation Authority has moved from transit cards to a new contactless payment system called One Metro New York – or OMNY. The new tap-to-pay system supports numerous e-wallets like Apple Pay and Google Pay on smart devices like phones and watches. In Asia things are more ambitious. Japan financial technology company Synqa aims to disrupt Visa and MasterCard’s domination in contactless payment by marrying its online payment gateway with its blockchain-based network system.
The union is designed to be an interoperable payment system for any digital transaction, Synqa founder and CEO Jun Hasegawa told Tech in Asia. Merchants will soon be able to handle digital values like e-wallets and cryptocurrencies without cost limitations. According to U.K. financial technology company Phos, there are 50 million merchants and 17 million point-of-sale terminals installed in Europe alone.
Bridging merchants with affordable solutions
With Mastercard as its partner, Phos develops software point of sale, or SoftPOS to enable contactless transactions with Android mobile devices. The pilot app will allow merchants to accept payments without the need for conventional POS hardware. The app is supported by near-field communication technology and can encrypt wireless data transfer, according to squareup.com. Security is certified by Mastercard.
Relying on Paynetics as its digital banking provider, SoftPOS will be tested for four weeks by approximately 200 merchants from the U.K., Germany, Bulgaria and Romania, according to FinExtra. Phos announced in May it had raised 2.5 million euros in funding and would follow up new features for the app – like a software development kit, PIN on Phone and an integrated loyalty system.
SoftPOS will be the more efficient solution especially for small- and microbusiness owners by utilizing smartphones to conduct a less costly contactless payment, according to the senior vice president for business development and fintech at Mastercard in the U.K. Scott Abrahams. As a digital payment solution Phos aims to simplify financial services and help small and micro-merchants to meet specific payment needs, Phos joint founder Antonina Martinova said.
Higher adoption comes with a higher price
Contactless payments offer a safer, cleaner and faster transaction with more control over physical proximity. However, Mercator Advisory Group said the growth of contactless transactions stumbles upon the high cost of both card processing and rates.
The Nilson Report estimated merchants paid card issuers US$53.6 billion for credit card interchange fees in 2019 – or an 8 percent increase compared with the previous year. As more people shop with credit cards there is potential for these fees to rise to US$731 million a year, according to payment consultancy CMS Payment Intelligence Inc.
Mercator said in its Covid-19 report that 35 percent of contactless payment consumers used the method more frequently and 12 percent of consumers shifted to contactless as a result of the pandemic. The pandemic has driven a significant boost for contactless payment awareness – pushing the necessity for contactless support for merchants across the world, a Mercator director and author of the report Sarah Grotta said.