February 17, 2017
Carrying cash is becoming increasingly rare, particularly for the UK’s urban youth. Millennials can buy almost everything they want (provided it’s under £30) with a tap of a card or their phone. From a tube or bus ride to paying for coffee, food and drinks and even an uber home, all without once resorting to coins or notes.
The ease of contactless payments has spurred a cultural shift, embraced by the younger and more tech-savvy generations, who opt for cards and phones and are happy to go for days or even weeks without using, or even carrying, coins or notes. Many older generations prefer to stick with the tradition of physical money started in the Bronze Age, though many use a hybrid of cards and cash, with far fewer using their phones. Once consumers have the option of using contactless, few decline it. For example, in Austria, practically the entire population of 7.63 million debit cards have a contactless function. Debit cards with a contactless function average every fifth transaction as contactless, while contactless credit cards are less widespread. Swiss banks are in the middle of introducing the contactless functionality on their debit cards, but already have a substantial population of contactless cards. Germany went contactless on credit cards about three years ago, and by 2020 all Girocards (debit) will be contactless. Across Europe, the card population and the user potential are very much present.
While the acceptance of contactless payment – no matter through which type of card – are common in certain areas, such as central London, they are not as common across the whole of Europe. The technology is still being rolled out, with some retailers yet to jump on the bandwagon. In countries such as Germany, Spain, the UK and Italy, contactless payments at the POS were launched just three years ago, in 2013. France, Denmark and Norway saw it introduced in 2014, with Finland, Ireland and Romania seeing it start in 2015. Cyprus saw its introduction only in 2016.
Although the roll out is recent, contactless payments are being widely adopted across Europe, as can be expected when a new technology makes life that little bit easier. The iPhone, for example, is yet to celebrate its tenth birthday, the first model was launch in 2007, but now it seems ubiquitous. With the rollout of Apple Pay in a number of European countries, smartphones are also increasing the contactless payment environment. In Switzerland, 90% of point-of-sale terminals (POS) are contactless enabled. In Hungary and in France it is around 60%. Both the UK and Germany have a 44% adoption rate.
However, there are some sticklers to change, with certain consumers fearing the technology isn’t right. In Germany and Poland, cash is highly valued, with many consumers preferring to have something to hold onto. The public does not yet fully trust contactless payments.
But this hasn’t stopped many large retail chains and merchants adopting the technology, with the majority upgrading to contactless terminals, investing in the customer’s experience, enriched by a faster transaction. However, take-up among smaller businesses across Europe has not been as quick, with many lacking the right systems. Many are also cautious that they might not know what the most appropriate technology is, how to implement it, or how to make the best use of the data it could generate. These are all areas where reputable payment providers can offer advice and support.
As contactless payments become trusted forms of payment and increase in popularity with consumers and retailers, SMEs could miss out on opportunities afforded by offering the customer’s preferred payment methods. Consumers are often used to dealing with very fast online services such as Google and Amazon, and notice the difference when moving to sites that are much slower, particularly when online payment is involved. More useful for merchants, however, is the additional loyalty that is created when a transaction for the customer can be made as fast and simple as possible.
A study by Dun & Bradstreet found that on average, people spend 12–18% more when using a credit card over cash. Anecdotally this figure increases again when contactless payments are involved, due to the relative ease of payment, and the lack of having to actually hand over any physical cash. Processing data suggest that this phenomenon may indeed be true when it comes to high-traffic shopping, where speed is the decisive element for a purchase. The soaring number of transactions in this segment of low ticket value gives evidence of the consumer appeal of contactless payment.
With the public’s increasing impatience and adoption of contactless payments, it would seem that those retailers who don’t embrace the new technology, may get left behind, forgotten about by once loyal consumers who now value speed of service above all else.