Contactless Payment Offerings from Card Issuers Soar

Contactless payment offerings have surged during the COVID-19 pandemic due to the payment method’s touch-free nature. This builds on a trend from 2019 that saw firms expanding both mobile payments and tap-to-pay physical card functionality. At a time when consumers are more aware of their health than ever, contactless payment methods serve to meet a dire need. Although the U.S. has adapted to mobile payments at a slower pace than other countries, firms are now pushing contactless cards at a greater rate than ever before.

Millennials are—unsurprisingly—the early adopters

Age plays an important role in the adoption of contactless payments, as respondents to the consumer credit card survey we fielded in mid-March 2020 proved. Save for Millennials, only a small percentage of respondents reported using contactless payment during in-person purchases using either a mobile device or a physical card with tap-to-pay functionality. While Millennials are more likely to complete contactless payments, still only 20% of these respondents claimed to do so “frequently” or “whenever available.” And that was compared with 11% of Gen Xers and 7% of Boomers.

Many consumers still lack relevant knowledge about the features and how they function, considering only 51% of consumers can identify the contactless symbol.

Of course, Millennials are generally more tech-savvy and adept with mobile products. So, the group’s higher usage of contactless payment methods comes as no surprise. More recent data findings reveal that, since the start of the pandemic, those numbers have gone up across the board. More than half of Americans now use some type of contactless payment.

Although contactless payment methods are becoming more mainstream, many consumers still lack relevant knowledge about the features and how they function, considering only 51% of consumers can identify the contactless symbol.

Card issuers strengthen efforts to encourage contactless payments, and retailers incentivize usage through rewards and bonuses

Several prominent card-issuing firms—including American Express, Bank of America, Capital One and Chase—have released cards with contactless payment capabilities in the last two years. Bank of America reissued four million contactless credit and debit cards to clients in New York, Boston and San Francisco in 2019. Following the pilot program’s success, Bank of America began a nationwide effort to reissue all cards and promoted the feature on its public site.

American Express stands out thanks to its unique position as a card network by eliminating signature requirements for in-person transactions in an effort to encourage adoption. Discover now integrates the contactless payment method for customers who request new credit cards, a reflection of the firm’s gradual adaption of tap-to-pay transactions. Other card issuers incentivized contactless transactions with limited-time bonuses:

• Chase offered select card holders 500 bonus points for completing at least three purchases of at least $1.75 between November to December 2019.
• Citi launched a limited-time $10 credit offer to eligible card holders who made three contactless purchases totaling at least $10 at Panera Bread, Target or CVS Pharmacy by the end of January 2020.

Retailers are also finding ways to encourage tap-to-pay usage by rewarding customers:

• Albertsons Companies Inc.—the parent company of Safeway, Star Market, Acme and several other grocery store chains—recently introduced Albertsons Pay, a contactless payment checkout experience offered through the Just for U loyalty app. Once the app is downloaded, customers can show their QR code at checkout to apply discounts, reap rewards and safely purchase their groceries.
• 7-Eleven combined contactless payment offerings with its 7Rewards loyalty program and incorporated “Fuel Loyalty” savings at participating locations in Florida, Virginia and Texas.

Firms promote mobile wallet compatibility among their contactless payment offerings

Mobile wallets provide another form of contactless payments for in-person transactions. Yet adoption remains relatively low in the U.S. Although Apple Pay was the most popular digital wallet among our survey respondents, only 12% use it. However, both high satisfaction rates and higher usage among Millennials suggest that the popularity of these services will only increase. All 11 firms tracked by Credit Card Monitor serve customers well in this regard by providing card compatibility with third-party digital wallet services. Most commonly, these include Apple Pay, Google Pay and Samsung Pay for mobile and wearable devices.

Based on the growing number of issuers that have introduced tap-to-pay into their lines of products, it is clear that contactless payment offerings—and usage—are on the rise. For more coverage of the user experience card issuers provide their customers, check out our credit card research services.