Contactless cards: The future is here

Contactless cards are something I really like. I had a funny experience at the grocery store in 2019 when I started using my first contactless card. When I touched my card to the payment terminal, the cashier began to shake his head. Contactless cards

“No, you,” he began, but as soon as the machine dinged and my transaction was completed, his expression turned to one of shock. “Whoa, it’s the future!” exclaimed the customer behind me. Contactless cards

As we’ve all done countless times since chip cards became popular a few years ago, I’m sure the store employee was going to tell me that I had to dip my card into the payment terminal. It was evident to him and the next customer in queue that card payments were only made by inserting the card rather than tapping.

The future has arrived after two years. Contactless cards have finally taken off in the United States thanks to the coronavirus pandemic and the push from all major card issuers to implement the new technology across their portfolio of products, which began a few years ago. Related: A study reveals that coronavirus concerns are increasing contactless payments. Contactless cards

How it works

Contactless payments are much faster than dipping a card and just as secure. Visa said in April of last year that 60% of its in-person transactions (excluding the U.S.) are contactless.

In a study released in April 2020, Mastercard reported that 79% of respondents across the globe said they were using some form of contactless payments. Between February and March 2020 – the start of the global COVID-19 pandemic – contactless transactions grew at groceries and drugstores twice as fast as traditional credit card transactions, according to Mastercard. Contactless cards

The technology behind tapping a card and mobile payment services such as Apple Pay and Google Pay is interchangeable. If a merchant can accept a tap from a card, it can accept a tap from a phone, and vice versa.

Generally, I prefer tapping a physical card rather than using a mobile payment service. I’m more comfortable identifying the card that offers the best rewards by pulling a specific piece of plastic out of my wallet rather than activating the payments app and scrolling through a list of cards on my phone. Contactless cards

Coming to America

Up until a few years ago, contactless payments were still in their infancy in the U.S. A.T. Kearney reported in 2018 that just 0.18% of point-of-sale transactions were contactless. Contactless cards

But that has been changing. That’s largely because the infrastructure for contactless payments is already in place. In its same study, A.T. Kearney reported that 70% of terminals had the necessary hardware in 2018 to accept contactless payments while more than 95% of new point-of-sale terminals are enabled for contactless transactions. Contactless cards

All Chase Visa cards have been equipped for contactless payments since the end of 2019. American Express and Capital One were among the early leaders in sending contactless cards to their customers (typically for new cardholders and when existing cards expire, although you can request them sooner). Wells Fargo joined the bandwagon in 2019, and Bank of America also offers contactless cards. (See chart below for a list of U.S. issuers that offer contactless credit cards.) Contactless cards

New York is a fascinating case study. It’s the country’s largest city and, in May 2019, it began accepting contactless payments at certain subway stations in Manhattan and Brooklyn, as well as Staten Island buses. The Metropolitan Transportation Authority is rolling out its OMNY contactless fare system through 2023.

We’re nearing a tipping point in the U.S. The majority of merchants are now equipped to accept contactless payments. More card issuers are delivering contactless cards to consumers. There’s a big mobile payments push from popular companies such as Apple and Google. And transit systems in New York and Chicago are contactless-equipped; other big cities, such as Boston and Washington, D.C., are turning to contactless payments. Contactless cards

In the U.K., many people first experienced contactless payments on London’s transit system, and then they realized they could also pay quickly and easily by tapping at restaurants, supermarkets, pharmacies and so on.

I think the same thing will happen here. The demand is definitely there: Our research in 2019 showed three-quarters of credit card holders prefer to pay for small purchases with cash and debit cards. The most common explanation for avoiding credit was that other payment methods are quicker and easier. With contactless payments, that’s no longer true. Contactless cards