With the EMV conversion mostly behind it, the United States is ripe for another big change at the point of sale—adoption of tap-and-go payments, says Visa Inc. With 96% of its payment volume now chip-based, “the next thing we’re focusing on is contactless,” Stephanie Ericksen, the card network’s vice president for global risk products, told a room full of payments executives Tuesday.
Visa’s goal is to process 55% of its U.S. payment volume from contactless-enabled terminals by the end of the year, Ericksen said. That doesn’t mean more than half of its payment transactions are expected to be contactless—the current proportion is less than 1%—but it does mean 55% of transactions will be processed from points of sale equipped to handle contactless payments, she told Digital Transactions News. Currently, that proportion is 46%.Why the big push for contactless transactions? There are a number of reasons. The technology smooths and quickens the payment process for the cardholder, particularly compared to the pokey performance of contact EMV. The first dual-interface cards—those equipped to perform both contact and contactless payments—will likely be “top of wallet,” Ericksen says, a key advantage for issuers.
But one big reason has to do with volume, the key driver for any transaction network. “It’s the cash opportunity,” Ericksen told the audience at Payments Summit 2018, organized by the Secure Technology Alliance and held this week in Orlando, Fla. “We capture more [cash] by going to contactless,” she said. Of physical-store transactions up to $10, just over 60% “is still cash,” she said, adding that the corresponding percentage in the $10-to-$20 range is just over 40%. All told, networks can add approximately $275 billion in “incremental volume” in the United States over the next five years by introducing contactless capability, Ericksen estimated.
So far, U.S. issuers have avoided dual-interface cards because of the cost. While a contact EMV card might cost about 90 cents in quantity, adding an antenna and other wiring for contactless capability can double that expense. As a result, only about 5% of U.S. Visa cards are contactless-capable. “It’s a drop in the bucket,” Ericksen told the audience.
Yet, other developed nations have not hesitated to adopt tap-and-go functionality. While not even the highly publicized introductions of Apple Pay and other mobile wallets in the United States have moved the fraction of contactless transactions past a measly 1%, the corresponding proportions in the United Kingdom and Canada are approaching 50%, Ericksen said.
Even so, stores are making progress. Visa’s top brass estimated last month that by the end of the year half of the U.S. installed base of POS terminals will be contactless-capable using near-field communication technology. Meanwhile, some 90% of shipments by terminal suppliers are capable of handling dual-interface cards, Ericksen said.
Visa is using its advertising, including spots during the recent Winter Olympics and National Football League games, to push contactless transactions, Ericksen said. With 80% of transactions still occurring in physical stores, “We’re still very much focused on that card experience,” she said. Indeed, Visa’s ambition is to make contactless not just habit-forming but routine. “We see converting from contact [only] to dual interface as developing that muscle memory for consumers,” Ericksen said.