Statistics show that only a small percentage of the cardholder base across Europe is using contactless. Why are so many not taking advantage of this quick, efficient and secure solution, and will we see greater uptake with mobile devices? Sascha Breite, head of future payments at SIX Payment Services, explains
Across Europe, millions of customers now own credit and debit cards with contactless capabilities, meaning they can conveniently and easily pay, up to a designated amount, at any one of many hundreds of thousands of terminals, equipped with contactless infrastructure. Current statistics show however, that only a small percentage of Europe’s cardholder base is using contactless.
Go deeper with GlobalData
It is important to note that contactless usage and behaviour is still in its early stages. Merchants, banks and consumers are just starting to become familiar with ‘tap and go’ contactless payments. Sweden and the UK are at the forefront of contactless technology. It is now possible to use cards directly on the tubes, trains and buses in central London.
What is most interesting is that smaller issues are now turning into key stumbling blocks. Merchants and banks alike need to educate customers, not only about the benefits of the technology, but more importantly to recognise its availability in their daily lives.
Too often there is a habit of customers passing cards to store assistants, who are trained to insert the card into a reader and then let the customer either enter a PIN or sign a receipt.
Banks often inform customers about contactless and encourage them to take advantage of it. But in many European countries the question is where can a cardholder use a near-field communication (NFC) payment card at the point of sale (POS)?
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataTake Germany for example: potentially two in three acceptance terminals are equipped with an NFC reader, but of these only 18% of more than 880,000 terminals are actually contactless-enabled. Now think about the consumer experience. How can someone know where contactless POS terminals are located when only two in ten are active?
According to a study published by the German Central Bank (Deutsche Bundesbank) nearly 80% of the population does not know about contactless payments, or has only heard about it. Just 9% have used it, at least once; 12% know about the option but do not use it.
Poland is another country with a good POS infrastructure. Cultural preference, however, remains for cash. In fact, at 90%, Poland has Europe’s highest proportion of cash payments.
Let us assume a consumer is aware of a card’s NFC capability. At the POS, the customer has to identify whether the terminal is NFC-enabled. How does a customer know this? There is normally an NFC sticker or symbol at the POS terminal, telling the consumer where to place the card. The chances are that a consumer might see a POS terminal with the NFC icon and tap against it for a payment. So what’s the issue?
As already mentioned, in Germany nearly seven in ten terminals have NFC readers, but only two in ten are NFC-enabled. So the chances are high that a consumer taps against the NFC symbol – if they have the courage to do so despite the critical glance of the cashier – and nothing will happen.
How often will consumers try it again in situations where they could fail? The chances are that they will stick to old habits and give the card to the cashier, or put it into the terminal’s card reader.
Reduce queuing time
Research in 2012 by Geberit AquaClean, showed that during the average UK adult lifetime of 60.5 years, 6,554 hours (273 days) are spent queuing, with supermarket queues one of the worst culprits. Wouldn’t it be great to free up personal time in this regard?
Given the number of checkouts in thousands of retail outlets in Europe, the total time savings that can be achieved on the merchant’s side and through contactless payment are substantial. Tapping a card at a terminal’s NFC reader and getting a quick response takes a second, seldom one or two seconds longer. Shouldn’t it be in everyone’s interest to adopt this technology?
Think of shorter lines at checkouts for consumers, and long-term efficiency gains such as fewer tills and related costs for merchants. As an estimated 80% of all cash transactions are for less than €20, there is a vast and growing potential demand for speedy contactless payments without having to enter a PIN.
For many years, large retailers in Germany such as Aldi and Lidl only accepted debit cards due to lower acceptance fees compared to credit cards. However, nearly all German debit cards did not have contactless features, while most credit cards did. For this reason the large retailers did not enable NFC at POS terminals that were equipped with NFC readers.
The regulation of multilateral interchange fees changed this: credit cards are now in a price range for retailers to accept them as additional means of payment. In the last two to three years, many retailers have now activated NFC to support faster contactless payments, which in most cases are credit card payments.
Visa and MasterCard, are also keen to introduce NFC payments in the market. With merchants, they have started to promote NFC capability in enabled stores.
How does the customer experience shape the cardholder behaviour? Consumers are learning that many large retailers offer contactless payments, but in most cases customers have to use a credit card. If customers are used to paying with a debit card, they will keep their old habit of handing the card over or putting it into the terminal. Entering a PIN is still the most common form of payment, and this is one of the most obvious hurdles for NFC payments.
Another obstacle for consumers is the confusion of where to tap the card at the terminal – at the display, or at the left or right side of the terminal? Sometimes the NFC icon is not clearly visible. The solution is as simple as it is effective: on top of the terminal’s casing the merchant could now place a cover explaining where to tap the card.
SIX Payments Systems was one of the first companies in Europe to process contactless payments, in 2007, and we have pioneered the technology ever since. SIX has equipped merchants in many European countries with contactless payment terminals. In Switzerland, Austria and Luxembourg with its help, the acceptance network of NFC-enabled POS terminals has reached more than 70% of the market.
Education is critical to make NFC a success. Millions of smartphones and other wearable devices will soon be NFC-enabled. Apple Pay and Android Pay have already started in UK, and Samsung Pay in Spain. It is only a question of time before other markets in Europe follow.
It is important, therefore, that merchants and customers know how to handle NFC payments at the POS, not only with the physical but also with the digitised. Consumers and merchants can then reap the true benefits of contactless payments.
