U.S. card issuers are adding contactless technology to credit and debit cards — but they are doing so in slow, small steps.
It's not for lack of ROI. New data from Barclaycard supports the notion that adding contactless payments to plastic cards drives higher overall transaction growth. Barclaycard began doing so 10 years ago in the U.K. and has seen a steady rise on contactless transaction volume.
The U.S. is still years behind the U.K. in building momentum for contactless payments at the point of sale, but there are inklings of growing industry support for contactless—Visa recently touted contactless payments via wearables in recent TV spots, and Capital One is promoting the availability of NFC on its Quicksilver credit cards on TV. Concurrently, mass transit agencies in several major U.S. cities are upgrading turnstiles to accept NFC.
U.S. issuers, in turn, are starting to inquire about the cost of converting all or part of their card portfolios to contactless, said Keith North, director of product capabilities at CPI Card Group. Depending on volume, it could cost issuers around 50 cents more to produce a credit or debit card with contactless capabilities, and issuers are still reluctant to commit to that level of expense with the relatively low level of NFC-enabled payment terminals in the U.S., North said.
“We’re hearing a lot of interest from issuers, but there’s no mass movement yet,” North said, noting that with half or fewer of U.S. payment terminals NFC-enabled, merchants are still cautious about investing in contactless card technology.
“There will need to be a little more of a push where consumers with payments-enabled devices begin to demand that merchants switch on NFC—which most can already do—before we see more issuers committing to manufacture more contactless cards,” he said.
In the U.K., it's a much different story. Barclaycard this month reported that its total contactless payment transaction volume soared 79% last year over 2016. Contactless transactions now account for more than 62% of all Barclaycard electronic transactions, and the majority of those are via cards, according to the latest Barclays Contactless Spending Index.
One factor in the latest surge was significant expansion of contactless payment technology for mass transit and parking lots in the U.K., but heavier use of payments-enabled wearables also helped contribute to the growth in contactless transactions also played a role, Barclays said. Transactions conducted via Barclaycard’s contactless bPay technology soared 129% over a year earlier, the bank said.
Even with this vote of encouragement from the U.K., U.S. issuers remain wary.
The exceptions include Citigroup, which rolled out a 100% contactless-enabled portfolio when it took over Costco’s cobranded program with the Costco Anywhere Visa card two years ago. But Costco still has not switched on contactless payment acceptance at its U.S. stores or fuel pumps.
What’s most likely to happen is that U.S. issuers will provide contactless versions of credit or debit cards as replacements or as individual customers request them—that’s already the case for large issuers including JPMorgan Chase and Capital One.
“Now that more terminals are capable of accepting contactless, as the original batches of EMV cards (issued in 2015) start to expire, I expect more issuers will be replacing them with cards that also have contactless capability,” said Zilvinas Bareisis, a senior analyst with Celent. He noted that certain issuers, including JPMorgan Chase and Capital One, already provide certain customers with contactless-enabled cards upon request.