Contactless payments are transactions made by tapping a contactless chip card, payment-enabled mobile device, QR code, or wearable device over a contactless-enabled payment terminal. The COVID-19 pandemic sped up contactless payment adoption for both businesses and consumers. Now, contactless payments are viewed as a more convenient and clean way to make transactions.
Below, we will look at how the contactless payments landscape has shifted over the past years from both the retailer and consumer perspective.
Retailer Perspective: Rise in Adoption of Contactless Payments
Before consumers could draw their conclusions about contactless payment, retailers had to adopt the technology. Here are contactless payments statistics around adoption rates and retailer sentiments.
1. Globally, in the first quarter of 2020, there was a 40% growth in contactless transactions
A study by Mastercard found that in just the first quarter of 2020, contactless payment transactions were up 40% from the previous year. This shift aligned perfectly with the start of the COVID-19 pandemic, showing just how closely contactless payment adoption and the pandemic are linked.
2. 67% of US retailers offer shoppers some form of contactless payment
By 2021 two-thirds of retailers provided their customers options for contactless payments. Those options include contactless cards that can be waved past or tapped on a card reader (58% of retailers offer this, compared to 40% in 2019) and digital wallet payments on mobile phones (56% compared to 44% in 2019).
This is the symbol that you will often find on cards and payment terminals to indicate contactless payment compatibility.
(Source: Wikipedia)
3. The global contactless payment market is projected to nearly triple in value by 2026
This speedy adoption trend was not just found in the United States. Research and Markets’ Contactless Payment Terminals Market – Growth, Trends, COVID-19 Impact, and Forecasts (2021 – 2026) report found that the global contactless payment terminals market was valued at $13.23 billion in 2020 and is expected to reach $51.07 billion by 2026. This would nearly triple the size of the global contactless market in just five years.
4. 74% of retailers state they will continue to use contactless post-pandemic
While adoption has been speedy, the question of whether retailers will continue to use contactless payments post-pandemic or if this was just a temporary shift remains. In a 2020 global study, Mastercard found that 74% of retailers around the world do plan to continue to use contactless payments post-pandemic.
5. 94% of retailers expect touchless payments to increase over the next 18 months
In the State of Retail Payments Report in 2020 from Forrester and the National Retail Federation, it found that 69% of retailers noticed an increase in contactless payments in 2020, and 94% expect this trend to continue over the next 18 months.
6. 70% of US merchants are experiencing customers requesting contactless payment options
When asked whether they had experienced customers inquiring about contactless payments in 2020, 70% of US merchants said that they had experienced such requests. Not only that, but 73% of merchants agree that, since the COVID-19 outbreak, they prefer customers to pay with a card or app, instead of having to handle cash.
Retailers have noticed an increase in contactless payments and don’t see the trend stopping any time soon.
(Source: The Motley Fool)
7. 67% of retailers that don’t accept contactless payments cite higher costs as a top concern
When asked about their hesitations surrounding adopting contactless payments, 67% of retailers said the increased costs associated with using touchless payments, specifically processing fees, was a top concern. This fear, however, is misled.
The NRF explains, “Banks charge merchants a fee averaging about 2.5% when a credit card is used to make a purchase in person, and the fee is the same regardless of whether the card is inserted, tapped/waved, or used via a mobile device.”
Higher processing fees apply only to remote purchases, i.e., online purchases or transactions done over the phone.
Despite the marginally higher processing fees for online transactions, click and collect services are extremely popular for modern consumers. You can learn more about how to implement these services with our click and collect guide.
Other concerns from retailers include:
- Cybersecurity and data privacy (65%)
- An increase in fraud (63%)
- Increase in chargebacks and disputed purchases (61%)
8. 80% of retailers agree that using contactless payments keeps their checkout area cleaner and safer for employees and customers
As we will look at below, cleanliness and safety are the top reasons that consumers use contactless payment options, and the people behind the register also agree. Eight in 10 retailers agree that using contactless keeps their checkout area cleaner and safer for their staff.
Not only that, but 84% believe it is safer for personal health than using cash, swiping a card, or inserting a chip.
With contactless payments, your employees never have to touch customers’ personal items.
(Source: Mobile Transactions)
Consumer Perspective: Use, Impressions & Preferences
In addition to increased adoption rates from businesses, customers also have an increasing preference for contactless payments. This section will examine consumer trends in contactless payment uses and preferences.
KEY CONCEPT: The “last click” is the last step a customer takes to submit their purchase, and it can make or break a sale. How customers complete transactions is key for spiking conversion rates at the last click. Learn more with our article on The Last Click: State of Payments Report.
9. Over 80% of US consumers have used contactless payments in the past 12 months
In Raydiant’s State of Contactless Payments 2021 Report, it found that 80% of US consumers had used contactless payments in the last 12 months. The usage of contactless payments, in Raydiant’s words, is “undoubtedly accelerating.”
10. 82% of consumers view contactless as the cleaner way to pay
A survey from Mastercard found that 82% of shoppers view contactless shopping as a cleaner way to do transactions. Further, a survey from Raydiant found that 64.4% of consumers are somewhat or very worried about the cleanliness of paying with a credit card for in-store purchases.
Most consumers are at least somewhat worried about paying with physical credit cards.
11. 67% of consumers said they were satisfied with the experience, and 57% would likely continue once the pandemic has subsided
The question that logically follows the uptick in contactless usage is, how are people liking it? Well, according to The State of Retail Payments In 2020 report from Forrester and the NRF, two-thirds are satisfied with their experience, and the majority, 57%, will likely continue to use contactless payments after the pandemic is over.
12. Globally, 46% of consumers have swapped out their top-of-wallet card for one that offers contactless
A 2020 study by Mastercard found that for nearly half of global consumers, their default card has become their contactless one, whether that be physical or digital. Not only that, but this proportion rises for consumers under 35-years-old, with 52% choosing their contactless card as their “top-of-wallet” payment option.
13. 57% of consumers say they are more likely to do business with retailers that offer a contactless payment option
Whether it be for safety reasons or simply a matter of convenience, more than half of consumers (57%) said they were more likely to do business with retailers that offer contactless payments as opposed to one that does not.
TIP: With older forms of payment losing popularity among consumers, it’s time to get your payments up to date. The first step is ensuring that you can accept credit cards. Learn more with our guide to accepting credit card payments.
14. If price, selection, and location were equal, 63% of consumers would switch to a business that installed contactless payment options
With customer loyalty becoming harder and harder to maintain, VISA found that one reason that people will switch to a new brand is for the availability of contactless payment technology. In VISA’s 2020 Back to Business Study, nearly two-thirds of consumers said they would switch to a new business if it installed contactless payment options.
15. Slow or failed contactless experiences and security concerns are the leading reasons why respondents don’t use them
We know that cleanliness and convenience are the leading factors why people choose to use contactless, but that also leaves us wondering what the learning factors for not using contactless might be. According to Raydiant’s 2020 State of Contactless Payments Report, the top reasons that people avoid contactless are due to failed or slow experiences (40.1%) and security concerns (21.2%).
Bad user experience and security concerns are the leading reasons against contactless adoption.
16. Contactless cards are up to 10 times faster than other payment methods
Consumers aren’t just more concerned about safety and sanitation; they also care more about convenience and speed when making purchases and assessing their satisfaction. As we saw before, contactless payments are considered much cleaner than other payment methods. Not only that, but in a new finding from Mastercard, we can also see that contactless payments can satisfy consumers’ need for convenience, too, as contactless is an average 10x faster than other payment methods.
17. 80% of contactless transactions are under $25
Another thing you might be wondering is what people are buying when they are using contactless. Surprisingly enough, 80% of contactless purchases are for transactions under $25. This is a category of purchases typically associated with cash.
18. 43.9% of consumers use Apple Pay as opposed to other mobile payments options
A report from eMarketer found that more Americans use Apple Pay than any other mobile payment platform. Nearly 45% of American consumers have Apple Pay, more than 30% have Starbucks Pay, 25% have Google Pay, and more than 15% have Samsung Pay.
Apple pay is the most popular mobile wallet option, followed by Starbucks and Google Pay.
19. About 3% of American debit and credit cards enabled contactless checkout; at that same time, up to 96% of South Korean cards enabled contactless payments
If we look back at the history of contactless payments around the world, we will see that, while the technology is relatively new to the US, it has been in use in other areas of the world for years. In fact, in 2018, when only about 3% of cards enabled touchless in the US, 96% were contactless-compatible in South Korea.
Only when COVID-19 struck and demands for safer and faster payment methods became mainstream did US retailers and banks start adopting contactless cards and readers. Before that, contactless technology had not taken hold in the US primarily due to a lack of consumer demand and hesitation by retailers to make the swap.
While contactless payments are a relatively new technology for US consumers, it has been in use globally for a long time.
(Source: VISA)
Bottom Line
While contactless payments’ recent burst in popularity was brought on by the COVID-19 pandemic and subsequent calls for greater convenience and cleanliness, this technology isn’t going anywhere. As we saw above, retailers and consumers alike have come to prefer contactless payments and anticipate their continued use long after the pandemic is over. With the contactless payments statistics from above, you are equipped with a better understanding of the payments landscape and might even be ready to invest in contactless yourself.
Want to learn more about contactless payments and how they work? Check out our article on everything you need to know about contactless payments.
