Contactless Payments: The Next Milestone in U.S. Payments
Global contactless payment adoption has grown at a fast pace in recent years. Our data shows that 42% of all UK transactions through NMI were contactless in 2018 versus 1% in 2013. There’s one notable exception among countries with increasing rates of contactless payment transactions, however: the United States.
Look Back at U.S. Payments over the Past Five Years
While consumers in other countries were discovering the convenience of tap-and-go payments, the U.S. was transitioning to EMV. To prepare for the EMV liability shift on October 1, 2015, the U.S. payments ecosystem devoted its time and resources into upgrading infrastructure, IT hardware, point of sale (POS) and payment solutions to accept EMV payments.
As of December 2018, 3.1 million storefronts — about 68 percent of all U.S. merchants —accepted EMV chip cards. That’s an increase of 692 percent since one month prior to the liability shift. The number of Visa chip cards issued during that same time rose from 159 million to 511.1 million. So, like card brands, banks, and merchants, U.S. consumers were also experiencing change. Using a payment card no longer meant swiping — a customer now had to dip the chip card, learn to patiently wait with the card in the payment terminal until the transaction was approved, and remember to take the card when the transaction was complete.
How Payments Changed in Other Parts of the World
About the same time, U.S. consumers were learning to dip, consumers in Canada, the UK, and other countries around the globe were foregoing EMV for a faster, easier, more convenient way to pay. Contactless cards enable a consumer to simply wave or tap a payment card on the card reader. The chip in the card communicates payment information to the reader, and the payment transaction is complete via near-field communication, a type of RFID technology.
Contactless payments took a while to catch on with consumers. NMI data shows that only 3 percent of consumers used contactless payments in 2013 in the UK, now the world’s largest contactless market. A pivotal point in contactless adoption occurred when the London Transport System began accepting contactless payments, which helped familiarize consumers with the technology.
A Look Ahead at the Future of U.S. Payments
With the heavy lifting completed to upgrade U.S. payments infrastructure and plans for widespread contactless card distribution from issuers including JPMorgan Chase, everything is in place for the U.S. to catch up with the rest of the world when it comes to contactless payment adoption. Many U.S. consumers, including NYC Metropolitan Transit Authority passengers, will have the opportunity to try contactless payments this year and see for themselves that payment can be faster — and lines can be shorter. Then, if the U.S. follows a similar pattern of adoption that has occurred in other countries, those consumers will be looking for that same convenience when making payments at retailers, restaurants, service providers, or other places where they do business.
There is little doubt that contactless payments will be the next milestone in the evolution of payment technology in the U.S. The only question that remains is when widespread adoption will begin. With all the vital pieces in place, the answer very well may be 2019.