5 key questions about mobile payments and contactless cards—answered
While some industry pundits claim that mobile payments are steering us toward a cashless society, the fact is that adoption of the technology remains sluggish. Gallup reports that just 13 percent of smartphone users have a digital wallet app, and 76 percent with an app never or rarely use it. And at least one third of U.S. merchants do not currently accept digital wallets, according to Mobile Payments Today.
Nevertheless, the card brands are pushing contactless payments, and Vantiv now Worldpay experts believe that these efforts will ultimately drive adoption of digital wallets among both merchants and consumers. We caught up with Worldpay Product Manager Jared Morgan, to get his take on the subject.
- How are mobile payments competing with contactless cards currently and into the future?
- Are consumers more likely to adopt mobile payments or contactless cards?
- Why is the U.S. lagging behind in the contactless cards race?
- What are the main obstacles in consumer adoption of both mobile wallets and contactless cards?
- How big of an obstacle is the technology involved?
JM: Contactless cards are quickly becoming the norm across the globe. Several countries across Europe, Asia, and Australia perform over 50 percent of face-to-face payment transactions as contactless, so it is only a matter of time before that trend catches on in the U.S. Additionally, merchant adoption is currently one of the biggest reasons that mobile payments have struggled to take off. But with over 95 percent of new merchant terminals capable of performing contactless transactions, compared to less than 40 percent enabled to accept digital wallets, contactless payments should begin to see higher adoption rates.
JM: Similar to EMV, consumers will be forced to adopt contactless cards, as the card brands make the shift to get more of that type of card into the marketplace. The number of contactless cards in the U.S. has already increased by as much as 75 percent over the past 12 months, and overall contactless transactions have nearly tripled. This shift to contactless cards will start to change cardholder behavior, with consumers no longer relying solely on swiping their payment card at the terminal. We believe that this shift in behavior will then help accelerate the growth of mobile wallet payments.
JM: It has been noted that the U.S. payment structure is more complex, and that is definitely true. We have quite a few more processors, as well as a drastically higher number of financial institutions, than other parts of the globe. The shift to EMV also happened a few years earlier in most of Europe and Asia than in the U.S. The EMV shift is still so recent here, which has delayed merchant and consumer adoption of both contactless cards and mobile wallets.
JM: Changing consumer behavior and the rollout of EMV are two main obstacles in adoption of these payment technologies. The EMV rollout in the U.S. shifted the overall timelines. With both the merchant and cardholder adoption, it’s kind of a chicken-and-egg scenario. Merchants aren’t rolling out mobile wallet acceptance because cardholders aren’t using it…and cardholders aren’t using mobile wallets because merchants aren’t accepting it. Again, the shift toward contactless cards should start to change some of that behavior.
JM: Since 95 percent of the new EMV-capable payment terminals are also equipped to accept contactless payments, the hardware itself is there. However, in many cases, the merchant does not have the functionality enabled and is not actively using it.