Even though a rising number of individuals feel safe spending more of their shopping time in person, the pandemic prompted a tremendous shift to digital payments, which is unlikely to fade.
The transition to more secure digital payment mechanisms began even before the pandemic.
However, when businesses closed and people were forced to buy practically everything online, the use of contactless payment methods skyrocketed.
Detailed Overview About The Use Of Contactless Payment:
A Mastercard survey done in 2020 indicated that contactless transactions surged twice as fast as traditional checkout methods at supermarket and medicine retailers between February and March, highlighting the pandemic’s impact.
According to the same Mastercard poll, 79 percent of respondents had switched to contactless payments, citing “safety and cleanliness as important factors.”
According to Reports and Data, the contactless payment market is expected to reach a multi-trillion-dollar size by 2028, driven by pandemic shocks in consumer behavior.
In March 2021, Visa estimated that tap-to-pay transactions in the United States had increased by more than 30% year over year.
In fact, nearly half of consumers said that enabling contactless payment methods is one of the most critical safety precautions retailers can provide, according to a poll of small business owners and consumers in eight countries.
Another 47% of shoppers said they won’t shop at a store that doesn’t accept contactless payments.
Consumers are increasingly opting for no-touch payments at the point of sale (PoS) using near field communications (NFC) cards, phone apps, and wearables.
Consumers can pay with contactless technology by touching or hovering their card or device over compatible PoS terminals.
The implanted integrated circuit chip and antenna that interfaces with payment terminals via NFC transmissions or radio-frequency identification are used to implement no-touch payment technology (RFID).
NFC, a subset of RFID, is a newer technology that is more widely used in developed economies and serves as the foundation for the most popular mobile wallets.
Mastercard, Apple, Square, PayPal, and Amazon are among the corporations pioneering the contactless revolution.
Apple Pay, Apple’s contactless payment app, tops all original equipment manufacturers (OEMs) in contactless payment transaction volumes.
Of course, the trend speaks to both businesses’ and customers’ health and safety concerns.
However, analysts believe that the simplicity, quickness, and security of digital payments will remain a must-have for customers long after Covid is no longer in the news.
As countries around the world continue to boost tap-to-pay transaction limits, contactless payments are here to stay, and their adoption will accelerate.
Visa has seen 1 billion additional touch-free transactions in Europe in less than a year since contactless limits were increased across the region.
Paradigm Shift To The Digital
The pandemic has transformed what customers demand at the checkout counter.
They are increasingly seeking interactions that are less personal, more digital. Covid was a major driving force behind the introduction of digital payments and forms of trade.
Global Payments Inc. is an American firm that provides merchants, issuers, and consumers with payment technology and services. Credit cards, debit cards, digital and contactless payments are all processed by the company.
Taco Bell, Starbucks, H&M, and J.P. Morgan are among the nearly 3 million clients served by Global Payments.
Before the pandemic, when merchants and other institutions initially started offering touchless payments, the idea was to make the checkout process more convenient and simple.
A debit or credit card could be dipped or swiped by customers. Instead of dipping or swiping a customer’s card, the next generation allowed them to merely tap it.
That swiftly progressed to having the “card” or payment mechanism embedded in a smartphone, eliminating the need for a client to ever take out their wallet. All customers had to do is tap the phone.
When the pandemic hit early in 2020, the demand for digital, contactless payments skyrocketed. Customers may already make payments through smartphone apps at stores like Target and Starbucks.
When customers were unable to enter establishments due to health and safety concerns, they may still pay and have their products delivered to their car or carried outside.
In the early days of the pandemic, Vitamin Shoppe implemented touchless payments. The company hastened to implement contactless payment methods like Apple Pay and others.
It also implemented technology that allowed businesses to offer digital receipts and allowed customers to scan purchases at Vitamin Shoppe outlets themselves.
People didn’t want to touch surfaces, turn over their credit or debit cards, or type in their pin on the keypad when the epidemic hit. The company had planned to offer mobile payments, but the epidemic pushed it forward.
Accepting mobile payments like Apple Pay and Google Pay necessitated integrating them into Vitamin Shoppe’s backend transaction flow. However, from the customer’s standpoint, the product was rather straightforward.
Customers were already used to using their phones to pay for coffee or to go on the subway in New York City, so they were quite well educated when they started using contactless payment.
Though significantly behind the more developed economies, contactless payment is becoming popular in developing economies as well. For instance, South Africa is using contactless payments to achieve financial inclusion.
Financial inclusion is a core principle of the Reserve Bank of South Africa’s “Vision 2025” and a major initiative in the country.
While the majority of South Africans (80%) have a bank account and a card, they still rely heavily on cash, with many having limited access to other financial goods such as credit and insurance.
Despite the desire of their customers to pay with their cards, around 90% of shops in the informal sector operate exclusively on cash.
This problem is primarily caused by problems with card acceptance at small businesses and in rural locations.
To enable card acceptance, a large rollout of Point of Sale (POS) devices across the informal sector would be required.
This is true for many other developing economies. The pandemic has helped accelerate the rollout of POS devices.
New entrants to the POS market are rapidly offering systems that are linked to mobile phones at lower prices for small businesses. As these continue to roll out, the likelihood of more people using cards to pay will rise across the world.
Furthermore, new entrants are developing micro-transaction platforms (using QR codes) that enable the contactless sending and receiving of low-value payments. This is unquestionably beneficial to financial inclusion.
There is an emergence of new banks, sometimes referred to as challenger banks, that provide digital banking services.
Because digital banks do not invest in branch infrastructure, they are able to save costs and offer their services at a lower price than their traditional counterparts.
Experts predict that omnichannel options introduced during the epidemic, such as curbside pickup and QR code contactless ordering, will continue to be popular, as will touchless payments.
QR code payments will be the most popular digital commerce technique in terms of volume during the next five years, accounting for 27 percent of all digital commerce transactions in 2024.
What’s Next For Cash Now That Contactless Is On The Rise?
On a broad level, the need for alternative payment methods — such as contactless payments, mobile wallets, and the ability to pay with points.
Other digital currencies — have been supplanting cash, which had been a noticeable trend even before the pandemic.
This is primarily due to a generational transition. According to a recent report, roughly a third of young adults say they never make cash purchases during the week.
Millennials, or those born between 1980 and 2000, are the generation that will shape the future of cashless commerce. One out of every ten Millennials now uses their mobile wallets for all purchases, whether online or at the point of sale.
Generation X is catching on to the idea of having alternatives to cash. 34% of persons under the age of 50 never spend cash at checkout during the week.
However, as a highly engaged, mobile-first consumer category, Zoomers are poised to take the demand for alternative payment methods to the next level.
With practically every respected consumer survey research on payments highlighting cashless transactions as a long-term impact of the epidemic.
And banks who are slow to integrate no-touch technologies or provide various payment choices at the point of sale risk losing clients.
Author Bio: Paroma Bhattacharya
Paroma Bhattacharya has dabbled in the realm of content production for over half a decade and possesses extensive experience in penning down pieces related to healthcare, technology, banking, and a wide range of other industry verticals.
Her articles focus primarily on balancing relevant data while never neglecting to make the material engaging. She believes in providing objective facts to help people make important business decisions