Contactless finance has emerged from the sudden outbreak of COVID-19 and has become the undisputed protagonist of the financial business of late.
Contactless finance refers to a form of service that does not have physical contact with Banks and other financial institutions based on carriers such as the Internet, mobile applications and customer service phone.
This form of service has attracted much attention during the COVID-19 epidemic and has become an important complement to the normal operation of financial services.
“Contactless” has recently become a buzzword in order to reduce the number of people gathered and reduce the risk of epidemic transmission.
Covid-19 has accelerated the shift from cash to bank CARDS.
A consumer survey conducted in the third quarter of 2020 by 451 Research, a global market research firm, showed a significant decline in cash consumption among US consumers. Since the COVID-19 outbreak in the United States in mid-March, cash has come under fire as a potential novel coronavirus transmission tool. Many merchants began putting up signs in stores or cash registers that encouraged customers to pay with credit cards and, in some cases, to ban cash altogether.
According to the survey, more than 40 percent of consumers use cash much less often, especially those with an annual household income of more than 150,000 U.S. dollars, and Gen Xers (born 1967-1982), 64 percent and 54 percent.
The decrease in the frequency of cash use is related to three habits of offline consumption of consumers since the epidemic:
1) Reduce contact with items such as sales terminals, cash, etc.
2) Reduce the time spent in close contact with others (such as cashiers);
3) Avoid events that increase shopping time, such as queuing, order changes, etc.
Contactless payments help solve these problems at the checkout for a more efficient and hygienic payment experience.
According to 451 Research, there are two main trends of non-contact payment in COVID-19.
One is the increase in new users. Many consumers who have never tried contactless devices are beginning to feel the convenience of contactless consumption, a pay-as-you-go approach that helps maintain social distance and personal hygiene. More than one in six respondents tried content-free trading for the first time during the epidemic, with gen Z (born between 1995 and 2010) and millennials receiving high levels of acceptance (25 percent and 23 percent, respectively), and even 10 percent of baby boomers (born between 1946 and 1964) trying this function for the first time.
The second is the increase of utilization rate. Twenty-nine percent of consumers said they increased their use of contactless payments during the epidemic, with millennials and Gen Xers (born between 1967 and 1982) even increasing their use by 40 percent and 39 percent.
The accelerated trend of contactless payment can bring greater user benefit to card issuers. For example, Visa cardholders increased their transaction volume by an average of 20 percent after their first contactless payment, especially in areas with a single transaction value of less than USD 25, using the highest percentage of contactless payments. The question is whether consumers will continue to use contactless payments when COVID-19 is over.
According to 451 Research, the answer is yes. 86% of first-time contactless payment users plan to continue using contactless payment, in part accelerating the possibility of cash substitution and underlining the growing importance of contactless technology as a major driver and sales driver for card issuers.
And ABI Research, another Research firm, predicts that the Novel Coronavirus COVID-19 will accelerate the adoption of contactless payment cards. ABI Research now believes that by 2020 the number of cards issued will exceed initial estimates, at more than 110 million, bringing the total number of contactless payment CARDS circulating internationally to more than 2 billion.
More than 65% of payment CARDS issued by 2020 will have contactless capabilities, according to ABI. The overall contactless adoption rate will be 6 to 8 per cent higher than the company’s initial forecast. Much of this growth can be directly attributed to the Novel Coronavirus COVID-19 pandemic.Coronavirus has aroused more interest in contactless solutions that are more hygienic than cash and reduce the need for physical contact with shared devices, such as payment terminals.
Payment providers such as Mastercard are working with the government and Banks to raise spending caps on contactless transactions, while bricks-and-mortar stores such as retail outlets are encouraging people to use contactless methods of payment under quarantine.
Cash is not being used as much as it used to be, though that is simply because consumers are spending less. But there is ample evidence that COVID-19 has accelerated consumers’ switch from cash to bank CARDS. Contactless payments have been the main driver of cash substitution in the long run, especially since the COVID-19 outbreak. Card issuers should include contactless card issuance in their strategic considerations, while making the health benefits of cashless payments widely known. Card issuers that have not yet developed contactless transactions or do not support digital wallets need to recognize that contactless payments are rapidly becoming the shopping of choice for US consumers.
Moreover, the development of contactless financial services has a lower cost advantage. With the continuous maturity of various technologies and the continuous improvement of 5G application environment, more new scenarios will emerge in the future.
However, experts also warned that the development process of e-payment still faces many problems and challenges. Some consumers’ payment experience is greatly affected due to their unfamiliarity with the payment process and problems with the payment system itself.