The term ‘contactless payment’ is gaining momentum on eCommerce blogs and websites recently, but what is all the fuss about? Find out why transactions are about to undergo a serious revolution.
41 million contactless payments
on Transport for London services between September 2014 and January 2015 alone. The contactless payment system is by no means a new trend, but its popularity didn’t really take off until last year.
As Tim Cook pointed out during the Apple Pay announcement at the end of last year, the main problem with current methods of payment lies in the primitive card system. The magnetic strip has been around for over 50 years, and no one until now has managed to find a way to improve upon it, all because they were thinking about changing what they already had, rather than creating something to fit the needs of today’s consumer.
There have been a few changes in recent years, with people being able to scan codes on their smartphones, but it still involves a lot of risk and security issues which have remained unsolvable. However, with recent figures on NFC showing very positive signs of growth in this area, we are left wondering what has changed. According to the UK Cards Association , the total value of contactless payments in the UK in December 2014 was 331% higher than the previous year, and they also predict that 5% of NFC-enabled phones will be used for contactless payments by the end of 2015.
Just take a look at some of the figures from the latest reports by Visa too:
• Customers made almost 20 million contactless transactions across the UK in May of last year – an 18% increase on April
• Over 37.8 million contactless cards have now been issued by UK banks – a 35% increase on the same period last year
• May 2014 set a new record for the total value of transactions made by contactless cards in the UK in a single month, reaching £126.7 million – a 14% increase on April 2014 – also indicating a growth of 189% since May 2013
• The average UK transaction value May 2014 was £6.43 – a 34p transaction increase from the year before
• The UK’s top 50 retailers are helping to drive their use these methods, accounting for 67% of all contactless payments in May 2014
So, why the sudden surge? Well, two recent changes to the eCommerce landscape are making us look at this area again:
1) More people are embracing technology as fears concerning security are far less prevalent
2) Apple Pay has opened eyes
People Love Tech
We are more in love with technology and the convenience it can bring to our lives than ever before, so such methods are becoming the norm. The uptake of new and exciting tech trends is higher these days because it is no longer just tech experts that are willing to trial things, but just ordinary Joes instead. With this in mind, it is no surprise that cash payments are on the decline in business and financial environments.
According to recent figures released by the IB Time, the total number of cash payments made by consumers of businesses and financial organisations in the UK fell to 48% last year (which is down from 52% in 2013). This is the first time that ‘non-cash’ payments have exceeded those made with cash, but it must be noted that cash remains more popular among retail customers (which accounts for 52% of all their transactions in 2014). However, the current forecast is that this will decrease to 50% next year, while there remains a steady trend for the use of automated methods and debit cards.
One other reason for people embracing tech is their lack of concern for security; while it will always be a consideration, people have become using cards and contactless as methods because they realise that it is far less risky than what can happen to cash. For example, if you were to lose a wallet or have it stolen, whatever cash you have will be lost no matter what, but if a card is taken and used this will be refunded under fraud by the bank if you report it immediately, while any illegal transactions that have occurred during that time can be cancelled. We are now ready for the next step.
Apple Pay: One-touch purchasing
The above factors have led to a change in mind-set amongst users, and the introduction of Apple Pay last year was the perfect timely accompaniment to it – an accompaniment which will truly revolutionise transactions.
If you’d like to view Apple’s promotional video on how this works then just
, but in a nutshell, Apple Pay works by selecting a card from your virtual wallet, holding your iPhone 6 up to an Apple Pay scanner, and pressing and holding the fingerprint ID button to pay… That’s it! No chip and pin, no driver’s license verification, and no scrambling to find a card. In the case of using an iWatch, it’s even easier, as you simply show the face of your watch to the scanner.
The set-up itself is very simplistic, and could be the deciding factor in its take off; Apple have partnered with certain banks (a list which is expanding all the time), allowing you to make a virtual alias of your card. Simply take a picture of your card and your iPhone reads all the details and inputs them into the correct fields, creating a card in your Passbook app. The transaction is purely between you, the bank and the merchant, so there’s no passing of details to the shop assistant or to the retailer you may be visiting.
With a huge list of big name brands such as Bloomingdale’s, Coca Cola and Nike already trialling in the US, it won’t be long before it is edging its way across the global scale. YouTubers are posting video after video of trials of the technology as well, adding to this overall perception of it not being just for techy people. This idea is supported even further by a
conducted by Auriemma Consulting Group’s Apple Pay Tracker; they interviewed a new group of iPhone 6 owners every eight weeks, and alongside an increase in new users, the report recorded a very high repeat usage rate. With as much as 63% of people stating that they now use Apple Pay at least weekly, this is a staggering adoption of the technology considering that it was only released in October of last year.
In the period January-Februar of this year, 70% of Apple Pay users saw themselves as early adopters of technology. Mobile payments may only constitute a small fraction of overall payments, but Apple Pay is the first service to with users in double-digits. However, the newly launched Android Pay is looking to overtake Apple’s share of the market; they hope to exceed where Apple is limited, as the constant need for software upgrades to ensure the performance of the phone means only iPhone 6 users and upwards can use the service, whereas the Android Pay share is looking to open the service up to various models and software grades.
Marianne Berry, Managing Director of ACG’s Payment Insights practice, stated: “The long-awaited transformation of the payments industry may finally have begun.” I believe this may well be true; consumers are becoming more and more reliant on technology, but also expecting it to assist them in all walks of life. Why will it change things? Because we are ready to move on to the next stage of payment systems, and this will have huge implications for eCommerce.
Apple Pay will be added as a payment option to many online retailers, and so will Android Pay no doubt, with more names hopping on the band wagon as the weeks go by. If you haven’t thought about the effects that your lengthy cart processes could have on your customer retention rate, then now is the time.
Customers will no longer stand for time-consuming payment pages, and the development of this system coupled with the tech-loving mind-set we mentioned earlier is a direct result of it. Apple listened to their consumer, and so should you.
If you found this post of interest, please share it on your social media account.