LONDON–The increased use of contactless cards in the United States is likely to cause cash usage for everyday transactions to decrease, according to a new analysis.
As more consumers gain access to these cards, the U.S. will eventually become a cashless society, stated GlobalData. As CUToday.info reported here, some U.S. cities have passed laws banning businesses from going cashless.
According to GlobalData’s 2018 Consumer Payments Insight Survey, more than half of the 45,000 respondents in the U.K., Australia, and Canada have at least one contactless card and use it for contactless payments.
“Contactless cards have been a comparative rarity in the U.S. until now,” said Bhavika Shah, associate banking analyst at GlobalData. “The reason for this is that U.S. banks are finally making serious moves to deploy contactless cards to the mass market, with JPMorgan Chase, Capital One, and Citigroup introducing more than 100 million contactless credit and debit cards in the US in 2019.”
GlobalData added that since U.S. consumers are used to paying with cards, contactless is likely to be adopted, with the contactless feature simply enhancing the convenience of card payments.
Benefits for Merchants
Moreover, added GlobalData, there are various benefits for merchants of increased consumer access to contactless cards, such as shorter customer lines and a faster checkout process. Merchants are also likely to benefit financially, as the introduction of contactless cards is likely to increase spending – as seen in the U.K. According to GlobalData’s 2018 Consumer Payments Insight Survey, 62% of the 4,000 respondents surveyed in the U.K. have a contactless card and use it for contactless payments. “This has led to a reduction of 37% in the total amount of cash spent in the U.K. from 2012 to 2017, and GlobalData expects cash use to decline a further 35% by 2022.”
According to the UK Cards Association, contactless card spending rose to £3 billion ($3.98 billion) in 2017, up from £117 million ($155.41 million) in 2014.
It Began Underground
According to GlobalData, the U.K.’s contactless boom was initially driven by contactless cards becoming available for use on public transport, most notably the London Underground. “If we see New York or other major U.S. cities accept contactless cards on their own transport systems, this is likely to accelerate consumer adoption and usage of this technology, which could eventually lead to the US becoming a cashless society,” GlobalData stated.
Added Shah, “Despite the benefits for many merchants, significant challenges exist for smaller traders. These merchants may find it difficult or costly to update point of sale (POS) terminals with contactless acceptance, particularly if they have limited financial resources and a lack of knowledge of contactless payments, they will likely find themselves forced to upgrade POS terminals to keep their revenue coming in.”