Awareness of contactless card payments in the UK has nearly doubled in the past year, resulting in more than a million payments per month, according to research that provides plenty of food for thought for the U.S. and other countries where such cards are available.
Despite heavy promotion by issuers, consumer awareness of contactless cards plummeted years ago. Banks shifted their attention to mobile payments, consumers rarely felt compelled to switch their habits, and merchants provided little promotion at the point of sale.
That trend in awareness is reversing, as 80% of UK consumers say they can identify a contactless symbol at the point of sale, with those in London being among the quickest to adapt to the new way to pay, according to research published last month by Barclaycard, a part of Barclays Bank PLC Retail and Business Banking. The bank did not indicate how many UK consumers responded to the survey, but Barclays boasts of 23.5 million customers worldwide.
Payments analysts in Europe have often said that lessons learned in the UK and other countries will apply to the U.S as it moves toward more contactless payments and the coming migration to EMV smart-card technology.
Approximately 75 million contactless cards have been issued in the U.S., or about 10% of the total U.S card population, according to current Smart Card Alliance figures.
The Barclaycard research also notes a shift in consumer spending preference, with 61% of people saying they preferred using cards over cash to buy items up to £20 (US $31).
While Barclays may be quick to blow its horn over any data that indicates an increase in acceptance of its mostly Visa-branded contactless payment cards, the total number of contactless transactions remains fairly small, says Gareth Lodge, a London-based industry analyst with Celent.
"A million payments a month sounds great until you realize that there are approximately 9.2 billion card transactions a year," Lodge says.
The new data may instead indicate cardholders are overcoming their fears about security.
Seventy-five percent of consumers didn't know that contactless payments are insured against fraud, the same as other card payments, but once informed of that safety net, "more than four in 10 consumers surveyed said they would be even more inclined to use the technology, with fewer than one in 10 still having concerns," the Barclaycard report states.
Barclaycard states its research reveals the most common way to lose money remains cardholder forgetfulness, rather than high-tech wireless skimming techniques. A quarter of those surveyed admitted they had left their wallet or purse in a public place, losing all of the money inside.
Barclaycard may see contactless acceptance rise even higher in the coming months. It reports the Co-operative Group, the UK's largest mutual business owned by more than seven million consumers, began testing contactless card payments prior to the Summer Olympic Games and would work with the bank and Visa to install contactless reader terminals in 175 food stores and 28 pharmacy branches.
While fraud concerns likely remain at least a partial barrier to adoption, Lodge says the research, or any discussion of contactless payments, hasn't really convinced consumers of a major benefit in converting to a new payment method.
"This isn't being negative about contactless, per se, but more of a recognition that habits are difficult to change," Lodge says. "In payments, innovation is measured in years, not months."
Ironically, in some ways, the push by card brands and issuers to convert consumers to contactless payment methods indicates that previous investments to get those same consumers comfortable with PIN codes were too successful, Lodge says.
"We're now trying to get them not to use PIN," since the low-value contactless transactions don't require PIN entry, he says.
While Barclaycard reports a surge in contactless card payments, the bank is also supporting use of mobile phones to make payments as part of the Orange Quick Tap technology with Visa Europe and Everything Everywhere Ltd., the T-Mobile parent known as Orange in the UK.
In addition, last spring Barclays announced its PayTag sticker, which affixes to the back of mobile phones, as another technology to promote contactless payments.
With Visa Europe pushing mobile and contactless pay at the recent Olympic Games in London as well, one would think that all of London town has converted to a tap-and-pay method.
Not so, says Lodge.
"On a purely anecdotal, unscientific basis, I can't say I personally see much evidence of contactless anywhere," Lodge says. "I don't even recall contactless advertisements running during the Olympic. I've never been asked, let alone encouraged, to pay that way, and so I think I've only made a contactless payment five or six times ever, and they were more a conscious decision to try it."
Much of what consumers do is locked into habit, Lodge says. As such, consumers "think about what they are purchasing, not how," he adds.