2019: The Year of the Contactless Debit

How the transit industry is driving the move to contactless payments

Two-thousand nineteen is poised to be the year contactless debit card issuance takes off. But the driving force behind this change may surprise you.

In major cities around the U.S., countless commuters use public transport. As lines of riders board buses and crowds push their way through train and subway turnstiles, speed is of the essence. Contactless payments are being touted as a way to keep commuters moving quickly. This will likely provide the push needed to move contactless towards the forefront of payment methods.

What is contactless?

Contactless cards and devices use near field communication (NFC) technology. Digital data is encoded in payment cards, smartphones and wearable devices such as fitness bands, and NFC is used to enable the card or device and the reader to interact with each other.

Contactless payments aren’t new either. Long before chip cards, a handful of large issuers and merchants offered contactless payment fobs, stickers and other devices.¹ But use of the payment method began to grow in 2018.

Anticipated Growth

Now that the conversion to chip cards is largely complete, issuers have begun to turn their attention to issuing contactless cards. The 2018 Debit Issuer Study, commissioned by PULSE, revealed that an estimated 5% of U.S. issuers offered contactless cards as of January 2018. An additional 37% said they were considering doing so by the end of 2019. Early results from the 2019 study indicate that almost every large bank intends to start issuing contactless-enabled debit cards (also called “dual-interface” cards) this year.

The cost of these cards – which are both chip- and NFC-enabled – has declined significantly over the past few years, making them a more attractive option. According to Gemalto, contactless cards will cost about $3.50 apiece – roughly the same as the first EMV chip cards², although they too have benefited from a cost reduction.

From an acceptance perspective, the transition to chip-enabled terminals has provided a significant boost to contactless acceptance, as many chip terminals are NFC-capable. NFC-capable doesn’t necessarily mean NFC-enabled, however. And even when it does, a merchant may not be aware that its terminals accept contactless cards.

Like growth in issuance of contactless cards, growth in merchant acceptance will be a key contributor to the expected increase in contactless transaction volume. ATMs, too, will play a role as terminal owners deploy more NFC-enabled ATMs.

The reduction in checkout times experienced with contactless transactions will enhance the customer experience at the point of sale, and may drive further migration to the payment method. As usage grows, the symbols shown below will help cardholders identify contactless-enabled cards and terminals.

How to Get Started with Contactless

If your organization isn’t ready for a full conversion of its cards, there are a couple of options available to help you dip your toe into the contactless pool. One alternative to a mass reissuance is to convert your cards to contactless on a natural reissuance schedule based on card expiry date. A second option is to begin with your highest-activity cardholders – especially those who are making mobile wallet transactions, which indicates their willingness to try new technologies.

If you’re ready to get started:

Talk to your front-of-card brand rep and get a copy of their contactless specification.
Contact your card vendor to agree on a production schedule and other details.
Coordinate your contactless deployment plans with your processor and PULSE.

PULSE supports contactless payments and is phasing in support for optional contactless cryptogram checking on behalf of issuers. Your Account Executive can provide further detail upon request.

It remains to be seen whether use of contactless payments will leapfrog mobile payments, which have yet to be widely adopted by U.S. consumers. But one thing is certain: contactless will grow considerably in 2019 as more issuers, merchants and terminal owners deploy the technology.