Pandemic could spark a surge of contactless payments

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Near Field Communication technology, or NFC, which enables payments to be made by waving an NFC-equipped physical card or mobile wallet near an NFC point-of-sale terminal, has been around for more than a decade. But long-ingrained consumer habits of swiping cards — along with merchants’ reluctance to invest in upgrading their point-of-sale equipment to accept a payment method that consumers largely didn’t need — created a chicken-or-egg scenario that bogged down adoption of the technology, particularly in the U.S., which has lagged other markets when it comes to contactless usage.

But amid consistent promotion from card issuers and gradual cardholder realization of the benefits of contactless payment, the technology began carving out a foothold in 2019. That momentum was turbocharged by the Covid-19 outbreak and attendant rise of social distancing and hygiene principles.

Contactless converts

Surveys conducted amid the pandemic consistently have indicated a surge in consumer preference for being able to make in-person payments without touching a card reader, keypad or pen. That preference for contactless prevailed in the corporate sector as well, noted April Bridgeman, director for Advito, the consulting arm of corporate travel management giant BCD Travel.

“We have definitely seen a renewed interest in contactless payments as part of our clients’ holistic return-to-travel strategies,” Bridgeman said, adding that 67% of respondents in a May 2020 BCD survey of 1,260 business travelers rated the use of contactless payment systems as the most important regulatory measure to ensure safe travel amid Covid-19.

“Travelers are looking to minimize unnecessary physical contact and … travel managers’ key concerns with getting their travelers back on the road center around health, safety, and duty of care,” Bridgeman noted.

As corporate T&E leaders revamp their programs with risk mitigation as a driving principle, many are eyeing contactless payments as a key element of the post-COVID “new normal.”

Cecile Mutch, senior director of corporate services for Kellogg, said that while her company’s corporate card provider will not offer contactless functionality until next year, “we are considering their mobile wallet solution for greater security and safety.”

Whether via card or mobile, Mutch said that she was confident Kellogg employees will be quick to adopt contactless payments based on their embrace of EMV chip-and-PIN payments as that technology became the standard a few years ago.

“We will also communicate a general acceptance that [contactless] provides greater card security for our cardholders,” Mutch added.

Merchant movement

On the merchant side, many retailers began actively encouraging contactless payments amid the pandemic due to their own safety and hygiene concerns–and the sudden shift in consumer attitudes is bound to compel even otherwise reluctant merchants to step up adoption of NFC acceptance technology.

“Importantly, merchants are asking cardholders to pay using contactless, so it has created a shared healthcare interest between the parties,” said David Voss, head of commercial cards in Europe, the Middle East, and Africa for Bank of America.

The share of contactless transactions made on all Bank of America-issued corporate cards in Europe in the second quarter of 2020 surged by 30% year over year as the pandemic took hold, Voss noted.

J.J. Kieley, vice president of American Express’s payments consulting group, noted that the card giant since 2019 has incorporated contactless technology in all of its newly issued small business and corporate cards in the U.S., and the company now is actively promoting adoption and acceptance of contactless among retailers.

“We are helping merchants set up contactless-enabled terminals and reminding merchants globally that they do not need to collect … signatures at the point of sale, which helps reduce the need for a shared stylus, pen, or finger on the touchscreen,” Kieley said.

Meanwhile, payment card networks recently have played another key role in promoting contactless amid the pandemic: raising the amount limits for contactless payment transactions, thereby enabling larger purchases to be made without a touch.

Those cap increases already have had a tangible effect in driving contactless payments.

“We are seeing commercial cardholders use contactless for transactions at the higher amounts, and consumer awareness of the changes is reasonably high,” Voss said. “Our average contactless transaction amount for commercial cardholder payments has increased by 16% in Europe, [and] we do expect to see the higher limits retained or even increase in some countries, over time.”

“It’s too early to say if it’s changed behavior forever, but we’re seeing a number of commercial cardholders paying by contactless for the first time, and if those habits take hold, it could represent a huge shift,” Voss said.

Mobile model

While plastic cards equipped with NFC technology are fast becoming the rule rather than the exception, contactless goes beyond cards.

“We are also seeing merchants interested in other forms of payments that help reduce physical contact, for example, the ability for consumers to pre-pay online, by app or smartphone,” American Express’s Kieley noted.

Along with offering hygiene and safety advantages, contactless payments via mobile could be particularly well-suited to helping achieve several longstanding goals of corporate T&E and payment programs, such as providing travelers with a more convenient, seamless, and “consumer-like” travel and payment experience.

That’s especially true in such markets as Asia and parts of Europe, where ubiquitous mobile wallets like Alipay and WeChat Pay have become an integral part of consumers’ everyday lives. Even before the Covid-19 pandemic, the travel ecosystem had begun laying the groundwork to incorporate those services, with hotels, airlines, restaurants, ground transport providers and other suppliers adapting their systems to accept the mobile wallet services.

“These trends signified to business travel managers to start strategizing on how to integrate digital wallets into their processes to drive traveler trust in their program, Advito’s Bridgeman said. “And now they need to adapt or risk being left behind.”

Mobile wallets also have stood as a key complement to virtual payment cards, which can be issued and accepted with no physical card involved at any point in the process. Virtual cards offer many widely acknowledged benefits, such as easy issuance, spending controls, data capture, and one-time use numbers that are useless to data thieves in the event of a breach. But technical limitations long have hamstrung virtual cards, especially in the hotel sector, where card numbers had to be sent to a property via fax–a tedious process often ending in confusion and frustration during check-in.

“With travel activity so low right now, we see this as the perfect opportunity to re-evaluate payment solutions,” said Bridgeman. “I think as travel programs look to modernize and become more efficient in the wake of this major disruption, virtual cards are a natural next step in the digital transformation of travel.”

Mobile wallets offer a way around such complications by enabling virtual cards to “live” on a traveler’s mobile device, which can simply be waved near an NFC terminal at the front desk–a process as simple as checking in with a plastic card. And once loaded onto a mobile device, virtual cards can subsequently be used to make other payments during a trip, such as meals, coffee, and ground transport, ensuring all in-trip costs flow directly to corporate spending managers for reconciliation and reporting.

Lindsay Huston-Herbst, head of North America commercial card product management for Bank of America, called mobile wallet integration “the icing on the cake” for the use of virtual cards in the corporate payment context.

“Virtual [cards] offered through mobile wallets will allow companies to eliminate manual matching and provide seamless reconciliation, enriched data, and reporting, even removing the need for expense reporting in some cases,” said Huston-Herbst.

“The ability to pay with a corporate virtual form of payment while on a trip for things as small as cappuccino is imminent,” Bridgeman noted. “It will be more convenient for travelers, increase security, improve spend controls, and provide more and higher quality data.”

Along with foregrounding hygiene and safety, the Covid-19 pandemic has spurred organizations to re-evaluate their overall travel and spending programs, striving to bring modernization and increased efficiency to those areas by implementing new services and systems.

“Many CEOs are telling us that Covid-19 will accelerate the technological transformation and are looking to us to help support them with this strategy,” said Huston-Herbst.

Along with the compelling case for adopting new tech, the currently dormant state of most corporate T&E programs makes now a particularly good time to dedicate efforts to implementing such solutions, Bridgeman noted.

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