To many, the global superpower that is the United States can seem like the trendsetter that the rest of the world follows. In terms of how they pay for things, however, it is far behind Europe and Asia. A study available here by A.T. Kearney last year showed that only 3% of American card transactions are contactless, compared to the UK’s 64% and South Korea’s 96%.
Why America is lagging behind
The faster alternative to chip and PIN, that only requires tapping it on a checkout terminal for the transaction, haven’t taken over the US mainly due to the size of the market. It is far easier to make changes to a comparatively small country like the UK compared to one of the world’s largest countries that has a far vaster amount of different retail stores and banks. The method of introduction also played a key part in this difference. Almost five years ago, when the UK first introduced contactless cards to the public, it was done through the popular travel option of public transport. Three years later, the number of contactless cards in the UK had already reached 119 million, accounting for 78% of debit cards and 62% of credit cards in use based on UK Finance statistics.
By contrast, the US don’t even use a regular credit card for public transport most of the time. In fact, chip and PIN could even be seen as a work in progress in America with how many retailers are just getting used to it, so contactless is clearly not held in high regards over the pond. Despite this, chip and PIN is growing more accepted over time, with retailers who don’t install chip technology to prevent fraud being held accountable as of 2015.
This has a silver lining, however, as it’ll make the transition towards the contactless system far easier for America. Most of the new card readers installed after the 2015 changes already have contactless technology built into them, giving Americans the option if they don’t trust it.
Last year, J.P. Morgan expressed desires to provide millions of contactless cards to customers and by the end of this year, Visa hopes the number of contactless cards in the US to have reached 100 million.
Whilst that seems like an overly ambitious goal for some, it’s what many banks and card issuers will be striving toward, as A.T. Kearney has already estimated banks could make a $2.4 billion profit from card earnings across the next five years by introducing contactless cards as a widespread system.
Research has also shown most contactless card payments will be used for mundane things such as grocery shopping, fast-food and clinic payments, as many people will want to pay for these generic tasks quickly and conveniently. That’s the way it is here due to our £30 limit on contactless payments to eliminate fraud- and the US may implement a similar policy.
Credit Cards in the US
Two years ago, the payments from all types of cards in the US (other than contactless), amounted to $6.6 trillion according to the Federal Reserve. Whilst this may seem like a giant amount, analysts believe it could be far greater if payment options such as contactless became popular in the country’s market.
A big bite for Apple
Beyond the banks and card issuers, there’s another party benefiting from the increase of contactless cards coming to America; the tech giant Apple. The payment service ApplePay acts as a contactless payment option for iPhone, Apple Watch, iPad, and Mac, and they’d reap the rewards of a contactless-loving USA.
Why Americans are scared of contactless
No option is ever perfect, as many worry about the security of contactless options. Despite evidence from financial experts presenting it as every bit as secure as chip and PIN, the public’s natural scepticism of new ideas have caused many to worry about the safety of this option.
Contrary to this belief, however, contactless cards have far less chance of counterfeit problems due to the chips placed into them, making them an even safer option. On top of this, creating a maximum spend on contactless would stop people from stealing a card and emptying a bank account quickly.
Despite the fear, some have of contactless cards in America, they are on the rise now and will only continue to grow. The US has started moving towards the cashless society the rest of the world is nearing, and contactless will be the figurehead of that.
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