Today’s Consumers Expect Contactless Debit – Every Day and Everywhere

Contactless payments  were already gaining steam before the pandemic. But in 2020, the number of contactless debit cards in the U.S. nearly tripled — rising to 30% of all cards, according to the 2021 Debit Issuer Study, commissioned by PULSE and conducted by Oliver Wyman.

Given all the ways that consumer behavior has changed during the past year and a half, this isn’t surprising. With hygiene and safety at the forefront of people’s minds, the concept of touchless has permeated every aspect of life — including the checkout experience.

Many consumers have come to expect contactless payments. Issuers that can meet this need will solidify their relationships with current customers and possibly attract new ones.

“Cardholders are very aware of contactless.  Once they’ve experienced how fast and secure contactless payments are, I think they'll use them whenever possible”

- Bryan Manka, Senior Principal, Emerging Technologies Management at PULSE

Desire for Contactless Exploded in 2020

People might be surprised to learn that contactless payment technology has been around for nearly a decade. Contactless terminals, for example, were already in use even before Apple Pay was introduced in 2014. Indeed, debit cardholders around the world were enjoying them well before they became top-of-mind with U.S. consumers in 2020.

Now that shoppers have added safety and hygiene to their list of concerns, they are tapping debit cards or using mobile phones to pay more than ever before. “Customers prefer the touchless aspect, of course,” explained Manka, “but they also benefit from the fact that EMV-based contactless technology is just as secure as a physical chip-read transaction.”

No wonder the Debit Issuer Study found that one-third of cardholders with a contactless card performed at least one transaction using the contactless chip in 2020, representing 5% of all transactions conducted with these cards. Overall, the number of contactless transactions increased six-fold in just one year.

To keep up with consumer expectations, merchants and issuers are investing heavily in this functionality. For the second year in a row, issuers that hadn’t yet deployed contactless cards cited it as their top priority, and many have accelerated their contactless rollout plans. In fact, by the end of this year, 64% of all debit cards are projected to be contactless, with that figure rising to 94% by the end of 2023, the study found.

Most national banks have already made the transition or are very close to doing so. In fact, 90 percent were issuing contactless debit cards by the end of 2020, and the remaining 10% plan to do so by the end of 2021. Community banks and credit unions are also working hard to close the issuance gap by the end of the year, as they risk losing cardholders or missing new accounts by looking limited or outdated.

Contactless Transaction Growth in 2020

Barriers to Entry Have Come Down

Now that consumers expect a fast, touchless experience everywhere possible, offering contactless debit cards (as well as mobile wallet functionality) isn’t just about being on trend. It’s an essential part of keeping existing account holders and attracting new ones.

Offering contactless debit cards and mobile payments is also a way to encourage the migration from cash to debit and increase the number of interchange-fee-generating transactions as a result.

Fortunately, making the switch is easy. The cost of issuing chip cards that are also contactless-capable has come down significantly, and payments partners are well versed in the requirements.

Taking the First Step

For issuers that are not yet familiar with contactless technology, Manka advised calling their issuer processor to understand the benefits, costs, and drivers involved. “They all have experience enabling these card programs, by providing the cards themselves or working with a vendor that does,” he said.

While preparing for the change, communicating with cardholders is also key. Whether it’s a competitive move intended to retain account holders or part of your regular card replacement cycle, cardholders should be informed of the switch to contactless cards and what steps they need to take to activate the cards.

It’s also important to highlight that contactless payments — whether with a contactless card or mobile wallet — don’t just reduce checkout friction, they’re also just as secure as chip-and-PIN transactions. By promoting these benefits and engaging with account holders, issuers can effectively encourage their cardholders to bring their payment product to the top of the wallet.

Get Started Today

Contactless payments were designed to win favor with consumers and the pandemic has more than proven their utility. In fact, in a survey by 451 Research, 65% of respondents said they wished more places accepted contactless payments. Because that number is only expected to grow, issuers that don’t respond quickly risk being left behind by consumers.

The rise in contactless usage by cardholders, the rapidly increasing acceptance among merchants, and the relatively low cost of adoption for issuers point to one clear conclusion: the question isn’t whether or not to give your account holders contactless debit cards — but when?

 

 

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