Contactless Everywhere

Some time ago I was on a conference panel discussing the evolution of payments. A fellow panelist asserted that NFC payments are doomed in the US because tapping isn’t a familiar behavior for most consumers. I asked the audience for a show of hands if any had used contactless or NFC technologies. They were likely thinking about payments, so only a few hands went up. I noted it was peculiar such a small number raised their hands, considering attendees at the conference had their badges scanned to enter sessions. In other words, every person in the room had just used contactless technologies. Clearly, it wasn’t something they found particularly notable.

Perhaps a more recognizable contactless use case for those conference attendees is physical building access: using a contactless card to gain entry to an office building, parking garage, fitness center or other secure area. It’s so familiar we don’t think about how often we are required to tap an ID card against a reader, but those of us who work in secure buildings do it every time we go to lunch, take a bathroom break or go to a meeting. ID lanyards around our necks, or retractable badge holders on our belts, are so familiar they could be the symbol of a generation of American office workers.

And we’re still expanding use cases where tapping is a convenient—and better—alternative to current methods. As someone who travels frequently, I have stayed in three hotels in three weeks that use contactless readers to unlock guest room doors as well as exterior doors and fitness centers. It was especially convenient when I returned to my room with my hands full and was able to bump the pocket containing my key against the pad to unlock the door.

Mass transit systems are migrating to contactless payments as well. The London transit system’s experience shows how contactless fits seamlessly into ticketing and transit. Since opening the system to contactless payments using bank cards, 1.8 million taps a day are made using contactless EMV cards. (Amazingly, the technology has progressed to the point where commuters can tap using their bank issued cards to enter the system without breaking stride. That’s a huge concern to anyone hurrying to catch a train!)

From an issuer standpoint, the mass transit use case is worth a special consideration since riding mass transit is a twice daily ritual for commuters. The card used to pay for those trips is granted “top of wallet” status by default.

While London is the gold standard for contactless payments in transit, other systems around the world and in the United States are moving towards implementing them. Chicago, the second largest transit system in the U.S., allows contactless payments using bank cards. New York’s metro system will begin installing contactless readers in 2018.

The hallmark of truly useful, even transformational, technologies is how quickly they become unremarkable, how fast they go from cool to commonplace. Perhaps that is the case with contactless technologies and those conference attendees: they use them so frequently, they didn’t think about how ubiquitous they truly are.

Author: James Wester

James Wester is Research Director for IDC Financial Insights responsible for the global payments practice. Mr. Wester’s core research coverage includes the evolution of payment networks and technology, developing fraud and security risks, and legal and regulatory issues. Based on his background covering the mobile payment space, Mr. Wester’s research also includes a particular emphasis on mobile and alternative payment methods and the threats and opportunities now facing the entire payment ecosystem from evolving mobile technologies.

Follow James on twitter: @jameswestert

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