Payments are increasingly contactless, but ‘contact’ is still in demand

By Oscar Nieboer, CMO, Paysafe.

Psychologists broadly agree that it takes up to 254 days to form habitual behaviour. It is impressive, therefore, that a near doubling in the use of contactless cards led to debit cards overtaking cash transactions at the end of 2017, according to UK Finance. The number of contactless payments now stands at 5.6 billion a year, which is astounding when you consider they have only been available for slightly over a decade, compared to the existence of cash for thousands of years. Contactless is now firmly at the heart of British commerce and the consumer experience.

Paysafe’s Lost in Transaction: Payment Trends 2018 research suggests that UK consumers want even more from contactless. 54% used it in the past month, and 51% of habitual contactless users would like to see the £30 spending limit raised. That’s in spite of the fact that 64% worry about the ease with which stolen cards can be used by unauthorised people, and in stark contrast to the US, where just 3% of consumers have used it in the past month.

In spite of security fears, it seems that the convenience of contactless cards is strong enough to influence user behaviour to the point where contactless cards represent the first steps away from traditional payment methods and towards digital alternatives. Contactless technology’s legacy will be observed in subsequent innovations that demonstrate the possibilities for payments to vendors, merchants and consumers.

UK consumers resist move to ‘frictionless’ payments

This idea of transition is particularly interesting in light of UK Finance’s finding that by 2027, consumers will still be making a similar number of payments to today – albeit by a growing range of methods. Retail is evolving. From stores that track the items you pick up and bill you for them transparently, to fridges that automatically re-order food items as stocks become low, advances in payments are coming thick and fast and disrupting centuries-old retail models.

On the face of it, such advances seem to offer unequivocal benefits to consumers. Brands such as Uber have demonstrated exactly how powerful transparent payments can be as part of the process of attracting new customers and building consumer trust.

But our figures show that UK consumers are actually resisting the move to ‘frictionless’ payments – invisible transactions that take place ‘behind the scenes’ in apps – due to privacy and security fears. 52% of UK consumers cite fraud as the biggest barrier to using them. 43% express concerns around the use of their data in invisible payment settings, while two thirds of British consumers (67%) think voice-activated systems are not secure. 69% worry about being overcharged and 59% report that checkout-free stores – where smart technologies record the shopping basket and automate payments – sound too risky, or they’d need to know more before using them.

It’s not all about less ‘contact’

We’ve seen that the majority of consumers are currently most comfortable using a new payment method when it concerns just a single product – and when it involves a physical action such as pressing a button. 43% of respondents said that they are already using or would consider using in the next two to three years, a smart button to order often-used items such as detergent or toilet tissue. Similarly, 40% said that they do or would be comfortable pressing a smart button in item packaging to re-order; and 44% said that they would let devices such as printers re-order consumables when they’re running low.

But it seems that however easy the industry makes things for consumers, they still want to be able to exercise a degree of control via physical actions such as button-pressing or card-tapping; especially where potentially expensive or perishable items such as food are concerned. While contactless goes from strength to strength, this type of contact remains in demand.

But despite these findings, there is still much hope for a frictionless future. UK Finance data shows an expected 6.4 billion cash payments in the UK in 2027, accounting for just 16% of all payments. This opens up many avenues for other payment types – be it contactless, digital, frictionless or cash replacement systems – as long as consumers can be convinced of their safety and usefulness.

Open banking enabled through PSD2 legislation will also contribute to the adoption of frictionless payments and making invisible payments more ubiquitous and trustworthy. By 2027, new habits will have been formed and consumers should be more comfortable with giving third parties access to their bank accounts to make automated payments as PSD2-driven payments become the norm.

That means that, alongside servicing the cash customer, payments companies and retailers must work towards making underlying frictionless processes feel secure, while continuing to innovate.

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