— November 30, 2018
For those of us who work in the payments industry, contactless payments and contactless cards have been something of a white whale for close to 20 years now. Always out there, just about to catch-on, if only…
A brief history of contactless payments
There’s a history section on the Wikipedia page for contactless payments that hits the high points. Merchants, payment networks and issuers have been trying for two decades to make contactless payments take hold. From Mobil Speedpass (1997) to MasterCard PayPass (2003) to American Express ExpressPay (2005) to Chase Blink (2005) to Visa payWave (2007), there is a long line of products launched and abandoned.
In the 1990s and 2000s, security became a big concern. The cards and fobs used RFID chips and not long after they began to rollout, stories about skimmers that could steal card information were popping up in the news and the financial blogs. Plus, the Great Recession didn’t help: with issuers failing, banks merging and regulators circling, few companies wanted to push a new technology that was being painted as unsafe. So quietly, in the early 2010s, issuers began removing the chips from their cards.
Then two things happened. First, in 2013 Target had a major security breach that included the theft of customer card data (including PINs). In response, the payment networks requested that issuers accelerate the adoption of the more secure EMV chip standard, and by the end of 2015 almost all cards issued had this standard. And second, Apple launch Apple Pay in 2014, which also used the EMV technology and put mobile payments into the hands of iPhone users.
Globally, the rest of the world was already one step ahead. By 2016 many countries were using a new contactless standard that combined the EMV chip with near-field communication (NFC), making contactless transactions safer than the RFID predecessors. Contactless transactions were becoming the norm, everywhere but in the U.S.
Visa wanted to change that, and in early 2018 the company began to raise awareness with social media and advertising featuring NFL players and Team Visa Olympic Athletes. These spots touted contactless cards as “a faster way to pay,” offering them as an alternative to inserting EMV chips, which seems to take longer than swiping. The contactless card marketing effort also laid the ground work to shift behavior by pushing the new action of contactless – “tap to pay” – which Visa saw as “developing…muscle memory for consumers” and improving their experience at point of sale.
But issuers have yet to really jump onboard for this new wave of contactless. Even through Capital One began issuing contactless cards in April 2017, only about 5% of U.S.-issued payment cards are contactless-enabled today. Until a few weeks ago, contactless cards were still waiting for their tipping point. It may have finally arrived.
Chase to make real progress on contactless issuance
Chase, the nation’s largest issuer of credit cards, recently announced plans to roll out 100 million contactless cards in 2019. Partnering with Visa, Chase produced new TV spots featuring contactless cards being used by NFL athletes.
One thing that stands out (to me at least) is that with all of the pain points about speed and security, the contactless card marketing from Chase and Visa choose to focus just on the action of “tap to pay.” The speed and ease are implied, but it may suggest that habituating the action (vs. the current swipe or insert) is the primary focus.
Chase has also launched a contactless landing page that dives deeper into the benefits of contactless (speed, security and ease). It also describes how to use the cards and how the rollout will work by product (in the FAQs).
But why will this moment different? Well, for one thing, merchants seem to be ready. Visa reports that over 50% of all in-person transactions in the U.S. take place on contactless-enabled terminals and that 90% of all new terminals shipped are contactless-enabled. That’s a big shift from the early 2000s. Second, before the EMV chip, the card swipe was just as fast as a contactless tap, so why change behavior? But with the lag times customers now experience when they insert EMV cards, “tap to pay” should inherently feel faster and better. And finally, we are in the era of “seamless” transactions, especially on mobile phones with capabilities — like biometric and stored cards — that make paying easy. Customers are primed for a fast checkout.
It also speaks volumes that Chase and Visa are putting marketing muscle behind this. It will be interesting to track the rollout and see how the contactless card marketing speaks directly to the cardholders as the new plastics are issued in the coming months.