Contactless Payment Use Drops, But Not As Much As Chip And Magstripe, a Report Finds

With students not in school, the closure of restaurants and bars, and work-from-home edicts in place, consumer spending is shifting. Witness that in the week of March 9-15, the payment volume made with dipped EMV cards fell 5.17% from the week prior and mag-stripe volume fell 13.07%, according to the CardFlight Small Business Impact Report released Thursday.

The bright spot, of sorts, is that the decrease in payment volume made with a tap—either with a contactless card or smart phone—only decreased 1.43%. Contactless-payments advocates have touted the method’s limited contact with payment terminals as appealing. 

In its first edition of the report, New York City-based CardFlight suggests the disparity could be explained a couple of ways. One is an overall shift toward contactless payment. “Or, it might be indicative of increased consumer attention toward spreading the coronavirus,” the report says. “Perhaps merchants and cardholder alike are utilizing contactless payment methods so they can avoid handing their card to the merchant or touching a terminal or card reader.”

It’s not just face-to-face transaction volume that has felt the shudder in consumer spending. CardFlight’s data, which sampled transactions processed from March 2 to March 15 by 60,000 small businesses that each process approximately an average of $130,000 in annual card payments, also found that card-not-present volume decreased 3.46% in the second week of March from the first week. Card-present volume fell 5.41%.

The report also looked at 17 merchant categories. The biggest gainer, at 49.02%, was specialty retail. The largest loss, with 48.72% less volume, was bars.

In related retailer news, Alliance Data Systems Corp., one of the major store card issuers, said it’s too early to assess the full impact of the coronavirus pandemic on its business.

“Given the current environment, we have stress-tested our business and are confident that we have capital and liquidity to sustain and invest in our business through this period,” Ralph Andretta, Alliance Data president and chief executive, said in a statement. “We have substantial cash on hand, and significant liquidity reserves and low-cost borrowing capacity at both our bank subsidiaries and parent company.”

He said Alliance Data should have more insight on the impact when it holds a coronavirus update call March 24.