What It Takes To Get Consumers (And Merchants) To Go Cashless, Contactless – And PIN-less

Cashless, Contactless And PIN-less Payments

The appeal of contactless payments has skyrocketed since the pandemic hit across the globe. Payment network giants such as Visa and Mastercard said in their most recent earnings reports that contactless payments, especially in face-to-face transactions, surged by double digits year over year.

Yet mobile wallet usage has been stuck in the single-digit range, despite being available for years.

In an interview with Karen Webster, Lillie Platko, general manager, payment networks at FIS, said the stage might be set for contactless adoption to be cemented as a payment method of choice even after the pandemic is a memory.

But it will take a mindset shift on the part of merchants and consumers — and a return of foot traffic to the stores, of course.

As Platko said, the data show that consumers are willing to try something different when it comes to payments, chiefly to avoid touching things. FIS has found that, as part of its own research, roughly 50 percent of respondents have used contactless methods to check out at a store since COVID-19 restrictions went into effect. And according to the data, 31 percent of consumers will use contactless or digital payments in the aftermath of the virus.

The question is whether the pandemic is spurring a true shift in consumer behavior — or will this be a temporary blip?

Platko pointed to the rule of thumb — a magic number, one might say — that can get new payment behaviors more firmly entrenched in consumers’ day-to-day habits. She pointed to years past, and the embrace of debit cards, as prologue.

“The magic number was to get them to do it three times,” she told Webster. With a nod toward the current environment, she said, the fear of touching things in a brick-and-mortar environment is likely to linger, spurring consumers to continue to move away from cash.

Thus far, there’s still bifurcation, Platko said, as to whether some consumers will be comfortable using the phone to pay or whether they’ll still be quick to pull out the plastic.

As Webster noted, consumers like their cards. There’s been a progression away from cash and toward cards, especially for low-dollar transactions in settings such as quick-service restaurants (QSRs).

But that shift — from cash to cards and from cards to contactless — will be an eventuality on the horizon rather than a quick pivot.

That’s due in part to the fact that, as Platko noted, issuers (and, from her perspective on the network side, stakeholders) are not making huge changes right now as they are challenged by the macro-economic environment and limited resources due to COVID response activities.

What Has To Change 

In order for contactless to become more widely adopted, merchants must be comfortable with the liabilities they take on when accepting those payment methods as compared to PIN-based transactions. Platko noted that in Europe, there are limits on how much people can spend before they are mandated to enter a PIN or a signature. In the U.S., there are no such limits.

That means it’s up to the merchants, who are knowledgeable about their average ticket sizes (and financial exposures), to determine their own comfort zones. By and large, Platko predicted, merchants will look to offer contactless payments if they don’t already do so.

The Great Unknown

But there’s a great unknown in the equation, said Platko: whether the consumer will respond to the merchant’s encouragement to use (or consider using) contactless.

“The consumer is going to do what’s comfortable,” she told Webster, adding that “almost everyone has a mobile phone, but they aren’t necessarily using a mobile wallet. If you’re using a mobile wallet, you probably ‘get it.’ But I’m not sure that, if you’re a card user, you even know if you have contactless.” After all, most individuals have multiple cards from multiple users. Some of them are contactless-enabled and some aren’t.

The eCommerce Hurdle

There’s another near-term hurdle in place toward a fuller in-store use of mobile wallets and contactless cards.

An increasing number of merchants are embracing ways to minimize, or even eliminate, in-person interaction at the point of sale or pickup. These firms are opting toward card-on-file or a fuller eCommerce experience, through order-ahead and pick up, to offer safety and convenience.

“I am amazed at how many people have actually moved ‘away’ from the store,” said Platko, adding that eCommerce will continue to grow, even post-COVID-19, though growth rates will moderate over time.

As has been seen so far in the eCommerce race, some merchants will enjoy a relative advantage over others, predicted Platko – and, in this case, that advantage lies with larger firms.

“It’s going to be stratified based on the size of the merchant and the resources available, just like it is today,” she said. “Larger merchants have an advantage in multiple areas, including processing costs, IT resources and distribution.” These merchants, Platko said, have the wherewithal to go “completely mobile and completely remote. They can combine eCommerce ordering and payment with in-store (or curbside) pick up.”

But beyond eCommerce’s near-term frenzy, once commerce in general does return to a normalized in-store setting — at the big-box retailers, for example — consumers will want to stage their transactions on their phones and will want a greater sense of control (and sanitation).

Here, the playing field becomes a bit more level, said Platko.

She noted that merchants, regardless of size or vertical, have the capacity to accept and promote contactless at the terminal, thanks to EMV. To get more merchants on board with contactless, an eventual tailwind could be the continued rollout of true PIN-less debit, which Platko believes may be more of a late 2020 to 2021 event.

“What I see from a network perspective is that all the updates that were going to happen across the calendar year have been pushed into that ‘fall 2020’ window,” she said.

As health and safety continue to dominate everything, down to the way we pay, “a lot of these changes are here to stay,” Platko told Webster.