Contactless pay isn't as easy as flipping a switch
Retail is an ever-evolving industry; and even prior to the current environment with COVID-19, a customer’s shopping journey may take many different paths through various channels. Now that we are solidly in this “new normal,” many merchants see their customers interacting with them in new and unexpected ways.
Despite news reports that contactless transactions are on the rise, the use of contactless, as described by the EMV specification, still remains in the single digits of total overall card transactions. What retailers have seen, however, is that there is an increase in the volume of and customers’ desire for touchless transactions, which include a variety of ways customers pay retailers.
Merchants are rising to the challenge by offering solutions to meet customers’ expectations, such as buy online, pick up in-store; curbside; and delivery, among others. The use of touchless transactions has led to an exponential increase to card not present (CNP) transactions, especially for merchant verticals which had not seen a previous shift to CNP channels.
According to Emarsys, merchants have seen consistent online sales growth for the past several years; and during COVID-19, the growth is even more accelerated with e-commerce transactions doubling during the same period in the previous year. This upward swing is proof that customers’ behavior is shifting to accommodate the “new normal” aimed at reducing touch points.
Meeting customers where and how they want to pay is critical for completing transactions, and while retailers want to offer as healthy and safe of a solution as possible, the truth is - touchless transactions impact merchants’ business. Not only do merchants bear the liability for credit and debit card-not-present (CNP) transactions, they are more expensive for merchants to process.
To make matters bleaker, some merchants do not have their full routing rights for debit transactions online because, despite a federal statute providing merchant routing choice, not all debit cards are issued with two unaffiliated networks enabled for online transactions. CMSPI, a retail consulting group, found that U.S. merchants would save more than $2.1 billion per annum if access to debit routing was more prevalent online.
As with any new product or service, there are many factors to consider when investing in a new solution besides liability and cost of acceptance. Speed, security, authorization rates, and customer adoption all affect merchants’ decisions in adopting new payments technology. It is not as easy as flipping a switch and turning any touchless, including contactless, solution on, and reports that indicate otherwise are misleading.
Merchants must take many planned, preliminary steps to incorporate new solutions into their point-of-sale systems and terminals. Given the complexity of integrating hardware, software, and testing, the speed at which merchants have been able to offer new solutions during COVID-19 for their customers is truly admirable, but the changes don’t happen overnight.
Merchants want to serve their customers safely and seamlessly, especially in the current environment. They are working with partners in the payments system to accomplish those goals in a timely and effective manner that makes good business sense and meets their customers’ expectations.