The time is now for cardless and contactless payments

COVID-19 pandemic: payment behaviour

During the novel Coronavirus pandemic’s height, several factors have driven consumers to a shift in the way they pay. First, almost all over the world, brick-and-mortar stores selling non-essential products and services were temporarily closed. Profitable businesses were forced to either pause their selling activities (e.g. airlines, Online Travel Agencies, entertainment/events) or to focus on optimising their services online (e.g. restaurants, fashion and beauty). Second, the news related to the COVID-19 effects and the possibility of the virus to be transmitted on surfaces as well as airborne has alarmed people, causing them to avoid in-store purchases whenever possible.

Online shopping, which had already been embraced by consumers even before the pandemic, has become the new normal. The frictionless experience provided by card-not-present payments has further influenced the rise of ecommerce sales, with the lockdown measures triggering an increase in online purchasing even more.  

The meteoric rise of cashless payments is evidenced by industry reports confirming a spike in ecommerce sales since the pandemic started, as people prefer having ‘zero-contact’ not only towards each other, but also when it comes to payments. According to S&P Global Market Intelligence research, 4 out of 5 consumers have shifted their in-store spend to online amid the COVID-19 pandemic. The same research discovered that Mastercard and Visa noted a 40% increase in contactless transactions for face to face transactions in Q1 2020 compared to Q1 2019. In April 2020,  a year-over-year increase was registered in online shopping, with record-breaking sales logged for retail and Buy Online/ Pick Up In Store (BOPIS) orders. Even before the pandemic context, over 75% of people were shopping online on a monthly basis, and 74% of consumers state they will continue to use contactless cards at the physical point of sale post-pandemic.

Contactless payments: here to stay

The demand for contactless is also noticeable among Generation Z and Millennials. A Billtrust report reveals that 46% of younger people pay with digital wallets between one and five times a month. At the same time, Expert Market found that 35 % of mobile wallet users are Millennials.

In the US, mobile wallet volume is set to swell from an estimated USD 662.3 billion in 2019 to an estimated USD 1.33 trillion in 2023 across mobile commerce, mobile P2P payments, and mobile proximity payments, according to eMarketer.

In the payment cards’ world, less than half of US card executives stated that they offer contactless cards, but 21% said that they plan to begin issuing contactless cards in the next 12 months, as the figure below suggests. Plans may accelerate due to changes in cardholder behaviour toward contactless payments because of the COVID-19 pandemic.

Going virtual: cardless payments 

The progress of payments from cash to cards has been happening organically for years, yet the pandemic has accelerated the move to virtual cards, supported by deep smartphone penetration and the rise of the mobile-first generation. According to Juniper Research, virtual cards are estimated to be more than USD 14 billion in revenues by 2022, with financial services being the fastest growing adopter of virtual cards.

Virtual cards can be of single use, reloadable or ongoing, and they can also work as electronic-wallets or e-Wallets (e.g. storing funds used for purchasing and more). Virtual credit and debit cards are issued by financial services organisations and used across payments networks such as Visa, Mastercard, American Express, UnionPay, or Discover. Virtual debit cards often participate additionally in country specific debit payment networks (e.g. NYCE, STAR, PROSA, Interac).

These types of cards come with several benefits. Since no physical plastic is needed, they can be easily distributed to customers immediately, anytime, anywhere, with low costs –a great opportunity for issuers to service customers and generate revenue with digital payment capabilities far sooner than waiting for plastic cards to be delivered. Moreover, younger generations, such as Millennials and Gen Z, are looking to virtual cards as a convenient way to pay. They are the next customers of banks and FinTechs, which means they are a valuable target for the payment industry.

The many forms of contactless payments

Beyond plastic cards and tap-and-go near field communications (NFC) payments made via smartphones, new contactless ways to pay are emerging, facilitated by  wearable payment technology and available through advanced processors like i2c Inc. Transactions via smartwatches, or wrist bands suggest multiple possibilities of embedding NFC chips with virtual card information, creating advanced forms of seamless payments. Several examples of payment wearables are purewrist.com, an i2c client that offers wristbands with payment fobs for sporting venues and events, Apple Watch, Google Glasses, Disney Magic Bands, and in Asia Pacific, the QR code. 

How can banks and fintechs offer these new services? Partner to compete

Today’s rapidly shifting market demands issuers consider partnering with a global advanced generation processor such as i2c Inc. to deliver virtual cards and contactless payment forms that consumers want.  Issuer processing as well as Managed Programs are available with i2c, to allow immediate delivery of a virtual payment card to a mobile phone or online via email or text. Banks and fintechs offering these modern card services will attract new customers and provide enhanced conveniences to retain existing clientele. Partnering will also allow virtual payment issuers to maintain a competitive edge over the nearly 60% of traditional financial services organisations that do not offer virtual/contactless payments, as indicated in the Aite research.   

Learn more

Instant card issuance via virtual cards and contactless payments are now and will continue to be a key differentiator in meeting account holders’ needs – delivering cardholder convenience, higher activation rates, increased usage, and program cost savings. As previously mentioned, working with an advanced processor, like i2c, is becoming critical to the long-term success of financial organisations. Issuers launching programs now are simply meeting the expectations of existing customers, yet partnerships enable issuers to be ready for additional adaptations of contactless payments. Consumer and business needs will go beyond virtual/contactless single currency payments to include multi-currency virtual payments and multiple e-wallets, which are also available today to future proof your service offerings.  

Need additional insights of Cardless and Contactless Possibilities? Visit www.i2cinc.com

About Nikki Waters

About i2c

i2c is a global provider of highly-configurable payment and open banking solutions. Using i2c’s proprietary “building block” technology, clients can easily create and manage a comprehensive set of solutions for credit, debit, prepaid, lending and more, quickly and cost-effectively. i2c delivers unparalleled flexibility, agility, security and reliability from a single global SaaS platform. Founded in 2001, and headquartered in Silicon Valley, i2c’s next-generation technology supports millions of users in more than 200 countries/territories and across all time zones. For more information, visit www.i2cinc.com and follow us @i2cinc.