May 6, 2020
Contactless payments are rising across the world in response to the coronavirus pandemic. Due to the demand for this type of payment method, to date, more than 40 markets have raised their contactless transaction value limits per NFC World.
According to a recent Business Insider article, Barclaycard has processed over 7 million contactless payments in the UK and Ireland since their governments raised their contactless transaction value limits in April. The drive to contactless has also expanded to New Zealand, where Prime Minister Adern says businesses must adopt contactless payments – customers can pay online, over the phone, or in a contact-less way.
The Psychological Factor – Cash is Unclean
By increasing contactless transaction value limits, the Business Insider article suggests, “These moves are meant to enable consumers to use contactless payments more regularly during the pandemic since they can allow consumers to make payments without exchanging cash or touching shared surfaces. And, the effort appears to be working: 43% of in-store transactions valued between the UK’s and Ireland’s original and new limits are now being made with contactless payments.”
More businesses and consumers are adopting new purchasing behaviors in an effort to avoid contact amid the Coronavirus pandemic. Customers seek a quick way to make purchases without handling cash, touching card terminals, or increasing contact time with checkout representatives.
Although the World Health Organization (WHO) did not specifically identify cash as a potential carrier of germs, they do recommend hand washing after contact with cash. There is a “psychological factor” that cash is unclean. This has triggered some merchants to encourage their customers not to use cash – contributing to the acceleration of digital payments.
On Mastercard’s first-quarter earnings call with analysts, CEO Ajay Banga said, “We are seeing an increase in the use of contactless transactions, and we think this trend will continue after the pandemic.” [CNBC]
Culturally, US Payments Are Made with Cards
Prior to the start of the pandemic, in the U.S., major mobile payments apps had adoption rates of less than 10%. The payment methods with the highest popularity include credit card, cash, and debit cards, while other third-party services such as Venmo and Facebook Messenger remain low in popularity. Experts cite a deeply embedded legacy system and rewards cards as reasons Americans don’t tap their phones to pay.
As an economic event, the pandemic continues to disrupt traditional payment methods and the rise of digital payments will most likely undergo additional transformations as economies recover and morph in response to COVID-19 impacts across communities. Rather than a temporary shift, many experts, including Banga, expect the move to digital to persist after the pandemic subsides.