Monday , August 15, 2022

As U.S. Contactless Card Payments Ramp up, Canada and the U.K. Point the Way to Mass Adoption

Contactless payments account for only an estimated low-single-digit share of U.S. general-purchase credit and debit card transactions, but contactless has a much greater share of payments in Canada and the United Kingdom, recently released data show.

Canada’s largest merchant acquirer, Toronto-based Moneris Solutions Corp., says that in the first quarter contactless for the first time accounted for more than half of card-present transactions—51.5%. Contactless payments grew nearly 25% year-over-year while overall credit and debit card spending rose only 2.5%, Moneris reported.

Meanwhile, nearly one-third of all credit and debit card transactions in the U.K. in February were made using contactless cards, according to a new report from UK Finance Ltd., a London-based trade association of banks, other financial firms, and payment networks. There were 644 million contactless card transactions in February, up 20.6% from 534 million a year earlier.

Diab: “In Canada, the stars aligned.”

The total value of February’s contactless transactions was £5.9 billion ($7.51 billion at current exchange rates), a 20% increase from £4.9 billion in February 2018. The data includes transactions on both U.K.-issued cards and cards issued overseas.

There are multiple reasons for the large market share of contactless payments in the two countries. Both converted to EMV chip card payments years ahead of the U.S., and most EMV point-of-sale terminals also support contactless payments using near-field communication technology when an NFC-enabled card or smart phone with a mobile wallet is tapped on the terminal. In London, contactless payments got a boost when the massive Transport for London mass-transit system began accepting general-purpose contactless payment cards.

In Canada, the financial system is much more centralized than that of the U.S., making new technologies and systems easier to deploy. EMV began as mandates from the payment card networks for issuers and acquirers, notes Patrick Diab, vice president of product and client solutions at Moneris. “In Canada, the stars aligned,” Diab tells Digital Transactions magazine for an upcoming story about contactless payments.

One big factor spurring contactless payments is that in contrast with the U.S., few Canadian merchants own their POS terminals; instead, they rent them from acquirers. That leads to quicker upgrades and helped spread terminals that supported both EMV contact and contactless NFC-based transactions, according to Diab. “The refresh rate is quicker,” he says.

In addition, high-speed Internet, an essential element for fast contactless transactions, was coming into the merchant market at about the same time the card networks mandated chip-and-PIN payments in 2006. “Contactless without high-speed Internet loses its value,” says Diab.

Visa Inc. predicts the U.S. by year’s end will have 100 million Visa-branded EMV cards of the dual-interface variety that support both contact and contactless NFC payments. A number of major card issuers have committed to issuing dual-interface cards, including leading credit card issuer JPMorgan Chase & Co.

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