2020 hailed “year of contactless” by payments study

By Richard Young

The coronavirus crisis has caused a surge in mobile and contactless payments, driving consumers to make fewer but larger purchases according to the 2020 Debit Issuer Study.

The study, which was conducted by US-based electronic funds transfer (EFT) debit network PULSE, also identified a rise in account-to-account (A2A) debit payments.

“We see the adoption of contactless payments – whether with cards or mobile devices – accelerating as touchless experiences increasingly become a way of life for consumers as we navigate through the pandemic,” says Steve Sievert, PULSE’s executive vice president for marketing and brand management.

The study found that following a rise in US debit transactions in early March as consumers stockpiled goods, purchases dropped 25-30 percent in mid-March as shelter-in-place restrictions took hold, and then began to recover in May as fiscal stimulus measures and business reopenings came into effect.

The study also found that Apple Pay dominates the US mobile payment landscape, with 98 percent of debit issuers enrolled in its mobile wallet service, compared with 91 percent for Samsung Pay and 85 percent for Google Pay. Apple has a cardholder enrolment rate of 17.5 percent, against Samsung’s 1.7 percent and Google’s 1.2 percent.

In part because of the pandemic and in part because of pre-existing consumer trends, the study has hailed 2020 “the year of contactless”.

“While the pandemic is accelerating the shift to contactless payments in the US, contactless was already an emerging trend, with issuers citing offering contactless as their top priority,” says Sievert.

“Two out of three respondents to the study indicated they would be issuing contactless cards by the end of this year, with another percent saying they expect to issue contactless cards by the end of 2022.

“Nonetheless, penetration of contactless cards will be fairly gradual. As of year-end 2019, 11 percent of all full-function debit cards were contactless-enabled. Contactless penetration is projected to reach 36 percent by year-end 2020, and 87 percent by year-end 2022. Only percent of respondents have no plans to issue contactless cards.”

Asked what issuers should be doing to better cater for changing consumers’ preferences, Sievert said: “Our recommendation is simple – do what most issuers are doing and what their customers expect by prioritising contactless card issuance. At the very least, that means issuing contactless cards on a natural cycle – to new customers and as cards expire or need to be replaced.”

He also recommends issuers encourage use of those cards by highlighting cleanliness and convenience factors.

“For others in the payments ecosystem, such as merchants, we want them to know cardholders will increasingly expect to have the ability to use their contactless cards at contactless-enabled terminals. Accepting contactless cards enables merchants to facilitate a checkout experience that is equal parts convenient, secure and reliable.”

He says next year’s study will indicate definitively how the debit ecosystem has adapted to the pandemic.

Until then, a separate analysis of the immediate impact of coronavirus for debit issuers has been prepared by consulting firm Oliver Wyman on behalf of PULSE. Among its recommendations are that debit issuers should focus on acquisition in order to strengthen their digital capabilities; promote contactless and self-service payment methods; and recalibrate their fraud models to adapt to the new payments landscape.


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