Although several countries have been pioneering the contactless trend for some time now, Americans have just recently boarded the tap-to-pay bandwagon.
Flashback to roughly three years ago, U.S. citizens were being asked to insert – or “dip” – their credit cards at the till, rather than swiping them.
Yet thanks to the New York metro, dipping is being phased out and replaced by tap payments, as the subway network looks to adopt the new contactless card technology in the coming year.
As of 2019, the New York Metropolitan Transit Authority will join other subway companies around the U.S. in ditching paper Metrocards for the new and improved payment system which allows passengers to tap their credit or debit card at turnstiles.
In preparation for this transition, some of America’s most prominent lenders have begun to distribute contactless cards that will be used with these new systems.
Regarding the preparation for this project, president of the Metropolitan Transit Authority Patrick Foye has stated: “The credit card and banking industries are working in parallel with us.
“This is where transactions – not only in transit but outside transit – are increasingly going to be in the United States.”
Visa Inc. predicts that by the end of 2019, 100 million of its cards in the U.S. will be contactless. Other card issuers such as American Express Co. and Capital One’s Quicksilver, Savor and Venture card portfolios have already enabled the tap-to-pay feature on their cards.
According to Manan Mahadevia, managing vice president of rewards and spend strategy at Capital One, “we have seen customers use contactless for more and more of those payment experiences where they are on the go and that tends to be amounts that could be smaller and more and more of those frequent use cases.”
When chip payments were introduced years back, the then unfamiliar method of payment was received with some backlash, as consumers argued that it lengthened the checkout process because cashiers in stores had little to no training on how to utilise the technology.
With contactless payments however, this should not be the case, as around half of all in-person transactions in the U.S. happen at retailers who have already enabled tap-to-pay transactions.
The process should be further sped up as tap-and-go payments will roughly take no more than 2 seconds, while chip payments require anywhere between 10—39 seconds.
“A few years from now, dipping may seem like something we did a long time ago,” says Julie Pukas, head of U.S. cards and merchant services at Toronto-Dominion Bank.
“Once we start seeing consumers use these cards every day in a transit area or, for example, in surrounding merchants, I think it will be a very easy adoption for customers and they will really like the speed.”
One of the reasons America still falls far behind other countries in terms of contactless payment development, is because not all merchants have fully embraced the new method of charging for goods and/or services. Walmart Inc., one of America’s largest multinational retail corporations refuses to accept contactless payments, along with 100 other merchants in the U.S. totalling to roughly 30%.
Several retailers have been reluctant to embrace the contactless trend as doing so would mean that they would have to accept all forms of mobile or digital payments. Merchants argue that the new technology prohibits them from processing their payments through more cost-effective channels.
Vice president of consumer products at Visa Dan Sanford however, argues otherwise: “The fact that, from an issuer perspective, the only real opportunity to transact at that turnstile is contactless only, really drives the value proposition.”
Sanford point out how issuers often tell him “if the only way for my cardholder base to transact at that turnstile is going to be with a contactless product then I need to be participating in that solution.”
The initiative taken by transit networks pushing for tap-and-go payments will help accelerate the change required from other merchants around the country to adapt to and welcome the new trend.