Tap-and-Go Increasingly Part of the Mobile Payments Landscape
The move to a contactless payment system is big news in the New York subway system. We actually got word from Paysafe to that effect recently, showing how contactless payments could be a real game-changer in the inefficient, cash-burning subway. Yet even this is just part of a movement that’s been in the making for over three years, as Americans make the move from swiping to dipping to tapping.
Visa recently issued predictions noting that 100 million of its United States-issued cards would be contactless in nature, and such a move would happen before 2019’s end. Not a bad timeline, but one that might have been better if it had bypassed the sheer frustration that dogged American consumers from the outset.
Making the move from magnetic stripe cards to chip-and-PIN proved a tough move to make, and left customers frustrated over longer checkout processes and having to repeat steps. Worse, merchants were often nonplussed at having to replace hardware and being stuck with the liability for failing to do so.
Contactless, however, looks to improve vastly on chip-and-PIN, while keeping the security factor of the newer payment system. While chip transactions took anywhere from 10 to 39 seconds, contactless transactions will take less than two seconds. Given that almost a third of the top 100 merchants in the United States don’t take contactless, however, it will take a lot of doing to make the cards useful in stores.
Yet there’s plenty of incentive to make the move. Banks could raise profits $2.4 billion annually, according to an A.T. Kearney report, and expenses could be cut by $22.2 billion, making for a significant boost to profitability.
The chance to put a $24.6 billion weight on the profitability scale is too rich to pass up. However, it’s not going to be easy; retailers are still likely smarting from the last big expense of putting out chip-and-PIN systems, and plenty of retailers never bothered to make the jump to begin with. Unless there’s a clear reason to make that move—like maybe a cut of that $24.6 billion in incentives—banks likely won’t get this concept off the ground.
Only time will tell how well it ultimately works, or if groups like Visa will show up all dressed up but with nowhere to go.