Coronavirus is pushing U.S. consumers to contactless payments
Contactless cards are a potential refuge for consumers who fear plastic and cash are carrying COVID-19.
The coronavirus, also known as COVID-19, has drawn attention to the safety and cleanliness of basic activities that many take for granted, such as air travel, being in enclosed places, or how transactions happen at stores. China and South Korea are reportedly burning or sanitizing banknotes, and new research suggests U.S. consumers are becoming more interested in contactless payments.
“The coronavirus could be the tipping for contactless in the U.S. much like the liability shift was for EMV,” said Demitry Estrin, founder and CEO of the Futurist Group, a financial services and information management consultancy.
“Despite issuers pumping out millions of contactless cards and more stores accepting Apple Pay, U.S. consumers have just shrugged their shoulders while the world embraced contactless payments. The question has always been ‘what will get consumers to change their payment behavior?’ Given coronavirus fears, I think we now have the answer,” Estrin said.
The Futurist Group recently conducted a two-wave study of 3,187 U.S. consumers before and after the coronavirus began spreading. About 38% of consumers now see contactless as a basic need or feature of payments, up from 30% a year ago. The percent of consumers saying they don’t need contactless payments has fallen from 41% in March 2019 to 33% in March 2020.
The dirtiness of paper banknotes is being highlighted by recent events in Asia. Starting February 15th, the Chinese government has issued a requirement that all Chinese banks begin sanitizing banknotes with ultraviolet light or high heat and then storing the bills in a sanitized location. The bills must be stored for 14 days before being released to the public in infected areas such as the Hubei province and for 7 days in unaffected areas.
The Bank of Korea, the country’s central bank, is heating banknotes, and in some cases burning the money. The landing page of Bank of Korea’s website states “Please understand that due to the spreading of COVID-19, we will not handle the exchange of coins and banknotes that have been introduced from abroad until further notice.”
“If you don’t have to touch anything or hand over your card to someone there is a big degree of safety in that. The consumer sensitivity to catching coronavirus is now showing up at point of sale,” said Richard Crone, principal at Crone Consulting, LLC.
Physical banknotes and coins can carry diseases. A U.S. Air Force study of banknotes collected in Ohio showed that 94% of them were infected with pathogens including E. coli, Salmonella and Staphylococcus aureus.
In a separate New York University study called the Dirty Money Project, biology professor Jane Carlton in 2014 found New York $1 bills carried more than 3,000 kinds of bacteria. One contributing factor was many people lick their hands when they count money, Carlton found.
“This is something that is forcing consumers to re-examine their behavior. When people are worried about touching something for fear of it being infected, the meaning of contactless in a payment all of a sudden takes on a new meaning in a very good way,” said Estrin.
It could also have a much deeper beyond contactless payments, impacting branch account opening and ATMs.
“Challenger banks all allow mobile account opening so it’s a bigger negative for banks that make you go into a branch to open an account. What about a germ-laden ATM? Wells Fargo’s $5 incentive to use Apple Pay to get cash out now makes a lot of sense,” said Crone.