Here's how the pandemic is completely changing how we pay

The U.S. has historically been slow to adopt contactless payment -- but that's all rapidly changing right before our eyes. A big reason? The coronavirus pandemic.

"When possible, it would be advisable to use contactless payments to reduce the risk of [COVID-19] transmission," a spokesperson for the World Health Organization said earlier this spring.

And as technology continues to advance, credit card issuers are introducing contactless payment methods to the U.S., where historically, it has been much less popular than other areas, such as Europe and Canada.

Contactless payments are not only more convenient but also more secure -- and now more sanitary -- than swiping your card. So let's take a look at which contactless payment options are available, why it's growing in popularity and what all of that means.

What are contactless payments?

Contactless payments come in two main forms on a credit card – mobile wallet or app payments and via contactless technology embedded directly into the card.

If your card is equipped with contactless technology simply hold it near the card reader to complete your transaction. Keep in mind, the payment terminal will need to have near-field communication (NFC) capability, so this won't work for older card readers.

Related: How to take your small business contactless

The growth of contactless — and what that means

In 2016, only 3% of all credit cards were equipped to handle contactless transactions. However, credit card networks and issuers have seen rapid upticks in contactless in recent years, especially during 2020.

Since the coronavirus outbreak began, fears over the transmission of the disease have forced consumers to rethink how they shop, spend and pay.

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For instance, Mastercard reported a 40% growth in contactless transactions worldwide in the first quarter of 2020 alone. And surveys have indicated that more than half of new tappers will continue to use contactless even after the pandemic.

Visa says that tap-to-pay transactions in everyday segments such as grocery and pharmaceutical are up more than 100% year-over-year. Overall, contactless usage in the United States has grown 150% since March 2019.

Related: 6 ways to pay without touching anything

What happens to cash?

While this is accelerating the global economy toward a more card-focused future, cash isn't just going to disappear. While card payments and contactless will continue to dominate, cash is still king — especially for marginalized communities, including the elderly and lower-income earners.

For some, access to banks and electronic payments just isn't possible and may create an additional chasm between the haves and have-nots. The disappearance of ATMs and retailers that won't accept cash payments will particularly hurt the unbanked.

Related: Dirty money: Could ditching cash keep you healthier this season?

Are contactless payment methods more secure?

For contactless to work, a unique one-time token is sent to the payment terminal for each transaction. The token does not contain any of your card details, so if the purchase is compromised, that token cannot be used to make another purchase.

This added layer of protection is the same system that is used when you insert your card's chip into a card reader, except contactless payments process much faster (in about half the time). Mobile wallets also have the added step of needing to verify with a PIN, password, fingerprint or facial recognition before a payment can be made.

One common concern is that thieves could use NFC card readers to steal your data electronically by getting physically close to your wallet. However, any hacker would need to be extremely close (within four-10 centimeters) and thanks to tokenization they still wouldn't be able to swipe your card data.

Related: Best contactless credit cards: Tap to pay

Where in the U.S. can you make contactless payments?

While contactless payments are not as popular in the U.S. as elsewhere, they are becoming more common each day. The vast majority of transactions are processed on payment terminals that are NFC-enabled and that number continues to grow as well. And that's on top of the fact that nearly everyone has a smartphone with access to a mobile wallet.

Related: Does your Amex card feel light? Here's why

Many merchants also have contactless payment options available with their apps. For example, you can make a contactless payment at Dunkin' Donuts or Starbucks through their apps. BP has an app where you can even pay via the app at the pump. And we're seeing the technology spread to public transit with the New York MTA launching a new contactless system.

Which card issuers are using contactless payments in the U.S.?

Almost every major card issuer in the U.S. has begun rolling out contactless card technology or has announced plans to. But even if a specific card that you have isn't outfitted with contactless payment technology, you still have the option of adding that card to a mobile wallet and making touch-and-go payments that way. This effectively means that as long as you have a smartphone, contactless payment is an option for you.

For more information, check out our guide to our favorite contactless payment-enabled credit cards.

Bottom line

Contactless credit cards and payments are wildly popular abroad but have been slow to catch on in the U.S. However, that is rapidly changing with coronavirus, the spread of NFC payment terminals and nearly every major U.S. bank issuing contactless cards.

Given the increased security, speed, and touch-free world that we live in now, it's not a surprise that contactless has arrived in full force here in the U.S. -- and found even more adoption internationally.

Related: First look at the revamped Google Pay app with a new look, rewards and much more

Additional reporting by Jason Stauffer.