The U.S. payments industry is experiencing a turning point in the adoption of contactless EMV. According to Mastercard, nearly 800,000 unique merchant locations were contactless-enabled in 2017. By the end of 2019, the company expects 65 percent of U.S. merchants will accept contactless payment methods.
As large issuers move to offer contactless cards, why should credit unions also consider making the switch? The answer is as easy as one, two, three.
Cardholders are constantly looking for a more convenient way to process their transactions. While conditioned to stand in line, punch in a PIN or wait to sign for their transactions, currently paying with a chip-enabled plastic amounts to a seconds-long transaction. In comparison, using contactless “tap and go” technology will reduce that time to one second, providing an expedited and convenient experience at the point of sale.
Adoption of this payment method is subsequently expected to impact the usage of mobile wallets, but not until consumers become accustomed to the “tap and go” payment experience that contactless cards will deliver. Eventually, consumers will have access to more payment options at the click of a finger and the ability to pay with a simple tap, making the purchasing experience for all consumers at any point-of-sale location simple and seamless – whether they use a card, mobile device, wearable or other payment object.
Visa estimates that 100 million contactless cards will be in circulation in the U.S. by the close of 2019 and seven out of 10 cards will be contactless across the world by 2021. As such, more and more merchants are turning on the NFC (near field communication) functionality at the point of sale, and large issuers are finalizing their contactless cards distribution plans. Recent announcements from Target, Chase and Citi are touting their readiness for contactless payments, while merchants like Panera, Walgreens and Whole Foods, among others, are already accepting this method of payment in locations across the country.
Visa and Mastercard are working with multiple municipal transit authorities, including Chicago, New York and Atlanta, to accept phone apps and contactless cards for entrance into their mass transit systems. Once contactless has been adopted by these mass transit systems and used by millions of Americans on a daily basis, adoption of other contactless methods – like payment with a contactless-enabled card – will increase and expand quickly.
This provides an opportunity for credit unions’ cards to gain that coveted top-of-wallet spot due to the ease and convenience of contactless.
- More Transactions
Does any credit union want to see a loss of transactions by not being ready with contactless card programs? Absolutely not. Credit unions must keep pace with their competition or risk the loss of transactions, which could ultimately result in loss of interest and interchange income – two vital components of any card program.
Credit unions should evaluate the growth opportunity, costs and their member base to determine if contactless cards are the right move and, if so, determine when and how to get contactless cards in the hands of their members. It will also be important to build education and awareness for members ahead of issuance, whether that be through mass reissue or when new cards are issued to members due to loss, fraudulent activity and the like.
Consumer demand for the latest technology will grow as contactless becomes more widespread, which is why credit unions should get ahead of mass adoption now in order to keep their solutions and offerings as current and competitive as possible.