With the zeal and thoroughness that the EMV transition has been discussed and covered over the past six months or so, you’d think it was the only technological innovation hitting payment cards in the marketplace.
It’s undeniably important, but in fact, there’s another facet of card modernization slated to take a significant step forward and improve consumers’ purchase experiences on the convenience, rather than fraud defense, front – contactless cards.
You may remember contactless cards from their brief moment of U.S. notoriety in the mid- to late 2000s. Despite several gas station and QSR chains adopting various forms of the technology, it was ahead of its time.
The terminal acceptance network at various retailer points-of-sale (POS) was not broadly constructed, so even if a customer had a contactless card, they could rarely use it. That issue has been resolved with the advent of EMV-ready terminals, which by and large accept contactless “tap and go” payments as well as the “dip and wait” EMV contact card transactions that are becoming standard.
It should be noted that contactless transactions made at those terminals with dual-interface cards are just as secure as when made with contact cards, thanks to EMV. Fortunately, the POS side of the payment ecosystem’s infrastructure has caught up, and there is now a viable business case for contactless cards to go along with it.
So what would catalyze contactless cards to proliferate now? Well consider the fact that an EMV contact transaction (where a consumer inserts the card into the terminal and waits) takes roughly 20 seconds. That duration can be compounded by consumer confusion about where to dip, how to dip or how long they need to leave the card in for it to be read.
An EMV contactless card transaction takes a mere 12 seconds or so, and the tap itself is only a second. On a singular basis, that discrepancy in transaction time might seem minuscule. But as we get further into the holiday shopping season, checkout lines will stack up and frustration will abound, so the cumulative reduction in time of using contactless cards could save quite a few angry customers and retail staff headaches.
The U.S. will likely be on an even more accelerated track to contactless adoption than Europe, where the cards are now widely used, because the value proposition for quicker POS transactions will soon become very apparent. Merchants want to maintain a seamless checkout process, which hinges on the broad familiarity of swiping a card. As an action, tapping is much more similar to swiping than dipping, and also gets shoppers out the door faster.
The most obvious counterpoint to the claim that contactless cards will take off is that we already have successful mobile payment applications that provide the same “tap and go” convenience. Why wouldn’t contactless cards simply be leapfrogged by mobile? Sometimes with consumers it all comes down to old-fashioned behavioral familiarity, as well as the fact that cards will realistically be around for the next decade or so in one form or another. Banks and other payment providers should prioritize offering options to their customers, as they can still deliver convenience and benefit by integrating both cards and mobile into their contactless portfolios.
Both the EMV and mobile payments phenomena have opened the door for updated payment technologies that are more secure, more inventive and primed for consumer adoption. Though there have been virtually no moving pieces in the card industry for the better part of 30 years, there have been many significant modifications within the last two to three. Expect contactless cards to continue that recent trend of change and innovation.
Cyril Villemin is vice president of financial services and retail for Gemalto