Coronavirus is moving us closer to a contactless (and cashless) future
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The U.S. has historically been slow to adopt contactless payment — but that’s all rapidly changing right before our eyes. “Contactless is the fastest, easiest and safest, and as of late, as announced by the World Health Organization, the healthiest way to pay.” That’s what Michael Miebach, Mastercard’s president and CEO-elect, had to say in a second-quarter earnings call.
As technology continues to advance, credit card issuers are introducing contactless payment methods to the U.S., where it has been much less popular than other areas, like Europe and Canada.
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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 reading: How to take your small business contactless
The growth of contactless — and what that means
In 2016, just 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 the first half of 2020.
Since the coronavirus outbreak began, fears over the transmission of the disease have forced consumers to rethink how they shop, spend and pay.
Mastercard, for instance, has seen 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 brunt of the pandemic.
Banks that issue credit cards are onboard too. Visa states that nine of the top 10 U.S. banks are now participating in contactless tap-to-pay, surpassing 175 million contactless cards in the United States. That’s more than any other country in the world.
What happens to cash?
While this is accelerating the global economy towards a more card-focused future, cash isn’t just going to die. 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 payment will particularly hurt the unbanked.
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 extremely close (within four-10 centimeters) and thanks to tokenization they won’t be able to swipe your card data.
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 much more common each day. The vast majority of transactions are processed on payment terminals that are NFC-enabled and that number is growing every day. And that’s on top of the fact that nearly everyone has a smartphone with access to a mobile wallet.
Related reading: 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. And we’re seeing the technology spread to public transit with the New York MTA testing 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.
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.
Additional reporting by Jason Stauffer.
Featured photo by Jacob Lund/Shutterstock.
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