This week will mark ten years since contactless cards were first introduced in the UK. Since 2007, contactless has represented a faster and more convenient way to pay. It has enhanced the consumer checkout experience – whether that’s buying tickets to the cinema, grabbing a coffee, or using a vending machine. A decade on from its introduction, there are 108 million contactless-enabled cards across the UK, and over 491,000 compatible terminals. Clearly, contactless has firmly established itself as a cornerstone of British commerce.
But it’s not just the consumer checkout experience that has been affected by the rise of contactless cards. Consider also how merchants, retailers, and wider British society has been altered since the technology’s relatively slow start. Four years after the launch of contactless cards and a relatively modest 70,000 UK retailers could claim to support them, with adoption only truly taking off when UK banks offered contactless cards to customers as standard. Fast-forward to today and contactless cards have become one of the most popular payment methods in the country, ahead of other pioneering contactless markets in Europe like Spain and Poland. Paysafe data shows 61% of UK consumers use contactless, and it has now surpassed chip & pin in bars, cafés, and fast food outlets. The technology has even inspired legislative change as the law will require all UK retailers to support ‘tap-and-go’ payments by 2020.
And the benefits of legislative support will extend far beyond card users. Unanimous integration of contactless capabilities will also facilitate more compatibility between retailers and emerging contactless payment methods at the point-of-sale, including digital wallets and smartphone apps. Contactless cards have played a crucial role in paving the way for a new era of payments acceptance, which will champion and empower millions of consumers across the UK by allowing them to pay using the method they prefer.
Across-the-board acceptance of contactless cards and other tap-and-go methods isn’t superficial on the part of merchants. Quite the opposite, contactless enhances the checkout experience, which in turn contributes to greater volumes of spending. A report from the UK Cards Association found contactless has been the impetus behind a 146% rise in card payments over the last ten years. The popularity of contactless for lower value payments has also driven the average value of a UK card transaction to £43.47 – its lowest level in the last 15 years. In supermarkets, in particular, ‘touch and go’ payments grew 136% in the 12 months to March 2017, while service stations and department stores have also witnessed significant increases with 218% and 147% increases respectively.
The introduction of contactless cards in the UK represented the first tentative steps away from traditional payment methods, towards the cutting-edge digital alternatives of the future. Most prominently, the contactless functionality first introduced within cards has paved the way for smartphone apps like Apple Pay and Android Pay to introduce their popular ‘tap-and-go’ functions. Think also how these same smartphone apps initially adopted traditional contactless card security measures, including a maximum transaction limit, in order to bring an additional layer of security during the early stages of their development. The near-field communication (NFC) technology, on which contactless payments are based, can also drive further innovation in payments. It seems likely that integration within smartwatches and sunglasses will be the next frontier for NFC technology, while some providers are even examining the use of contactless within emerging biometric technologies such as fingerprint readers and vein scanners. Arguably, the foray into contactless payments has inspired the confidence to explore in the finance sector more widely, with banks launching iris scanning and voice banking as forms of customer authentication.
But without looking too far ahead, contactless cards still have plenty left to contribute in the short term. Firstly, it seems highly likely the limit for contactless card transactions will be raised. This is reflected in Paysafe data, which shows over a third of UK shoppers would like to see the contactless transaction limit raised above £30 (which has been in place since October 2015), a desire which is likely to grow following the decision of Apple Pay and Android Pay to remove limits from their respective applications. Increasing the limit would enable use of the technology in a wider variety of purchases, diversifying contactless cards from the lower value niche they currently occupy and ultimately furthering their appeal amongst consumers. The UK is set to make 120 million payments a day by 2024, and we can expect a significant proportion of those transactions to be contactless-based.
Going forward, the true value of contactless cards will extend far beyond increasing transaction limits or widespread retailer adoption. Contactless cards have set the ball rolling in the payments industry, and their legacy will be observed in the subsequent technologies and innovations that have opened up awareness of payments in the minds of vendors, merchants and consumers. The simple act of moving beyond physical money has opened our eyes to how quick, simple, and convenient payments can be. In turn, this realisation has cultivated the environment for myriad fintech innovations to emerge, develop and thrive – from digital wallets and smartphone apps and biometrics to cryptocurrencies such as Bitcoin.
Ten years since their introduction and contactless cards have established themselves atop the summit of UK payments. At the current rate of change, the question is, what will the payments landscape look like in another ten years?