Contactless Payment Trends We’re Watching Now for 2022

April 23, 2022by admin0

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Rafael Lourenco, EVP & Partner, ClearSale

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Although contactless payments became much more popular because of the pandemic, they’re not going away even as many regions return to more in-person activities. In fact, contactless payment methods are more popular than ever, driven by health precautions, security concerns, and the convenience that a well-designed contactless payment experience provides.

This year, businesses need to offer contactless options at the point of sale to stay competitive, including adding NFC-enabled terminals to support mobile wallets or providing scannable QR codes. Ecommerce retailers can also catch the contactless-payments wave by adding digital wallet options to their checkouts.

However, the contactless experience isn’t yet as convenient or secure as it could be, affecting the consumer’s experience and a merchant’s fraud risk. For retailers who already offer contactless and digital wallet payments, now is a good time to audit those experiences to identify ways to increase contactless payment security and functionality.

More contactless payment growth, with some hurdles

frictionless payment

In 2019, just 26% of Americans had made a contactless payment at least once and contactless “appeared to be gaining in consumer adoption,” according to the Kansas City Federal Reserve Bank. The pandemic threw that shift into overdrive.

By May 2021, digital experience firm Raydiant found that more than 80% of American shoppers were using contactless payments, primarily for safety, security and convenience. The shift has changed how many consumers evaluate their retail options” Raydiant’s State of Contactless Payments Report found 57% of consumers are more likely to shop with businesses that offer contactless payments.

That doesn’t mean the contactless experience always meets customers’ expectations. Almost half of the respondents in Raydiant’s survey said they’d failed at least one attempt at a contactless payment, and failed attempts are a key reason consumers give up on using the contactless option. Consumers who chose to stop using contactless payments also cited slow checkout processes and security concerns. This year, we expect to see more focus on optimizing the contactless checkout experience.

Move away from cards happening online too

tap and pay

For online shoppers, digital wallet adoption was at a possible “inflection point” in 2019, when McKinsey found that nearly half of US consumers were using in-app digital wallets for e-commerce payments. Digital wallet use has surged since March 2020, perhaps because of the sheer volume of shopping that people have been doing online since then.

In ClearSale’s most recent State of Consumer Attitudes on Fraud and CX report, 71% of online shoppers in the US, Canada, Mexico, Australia, and the UK said they sometimes or always pay with a digital wallet instead of entering their payment card data into websites.

Interestingly, not only do younger consumers have higher digital wallet use rates, so do the consumers who spend the most money online. Among adults aged 18 to 39, 80% use digital wallets instead of cards. Among shoppers of all ages who spend more than $400 a month online, 84% use digital wallets. Among adults in both groups, 89% rely on their digital wallets rather than credit cards online.

Overall, only 28% of shoppers always have their credit card handy while they shop online, and among shoppers aged 18 to 39, only 16% do. Because of this shift away from card use, we expect 2022 to be the year merchants add digital wallet options or lose customers.

Improving the contactless payment/digital wallet experience

As noted in the Raydiant report, functionality is still an issue for point-of-sale contactless payments. As a result, retailers with existing contactless options may need to change their processes to reduce friction. For example, requiring a customer to sign a receipt or touch a terminal screen defeats the safety and convenience benefits that contactless payments provide.

QR code payments

Businesses that use QR codes for mobile payments in-store need to secure those codes to prevent tampering and hijacking. The FBI recently issued a warning about QR code scams. Criminals replace printed QR codes at restaurants, parking meters, and other locations to redirect victims to phishing websites. A more secure approach is to generate QR codes on digital displays that the business controls.

When customers use their mobile wallets to make payments online, friction from excess data entry can frustrate customers and cause the retailer to lose the sale. For example, 35% of consumers in the ClearSale survey said they’d abandoned an online cart because checkout was too complicated or time-consuming. However, retailers can leverage mobile wallets’ data to save customers the effort of keying in their billing and shipping addresses and other details.

We’re also seeing more recognition of the need to move away from SMS code’s two-factor authentication for digital wallet payments because of the risk of credential cracking. Biometrics can replace SMS 2FA with safer options. For example, biometrics built into some cards like Mastercard’s validate the user’s fingerprint before the contactless POS transaction is approved. This prevents thieves from using stolen contactless cards to make in-person purchases. Facial recognition like Apple Pay’s Face ID and fingerprint recognition for mobile wallets like Samsung Pay can keep thieves from accessing wallets on stolen phones.

For digital wallet use online, businesses can reduce the risks of account takeover (ATO) fraud by screening these orders using behavioral biometrics. This measures if the current order aligns with the customer’s order history, recent activity, location, device and other behavioral signals. These tactics are critical now because ATO fraud is increasing, it’s harder to detect than CNP fraud, and digital wallet chargebacks are often difficult for retailers to dispute successfully.

Businesses that work to improve security and convenience this year for their contactless and digital wallet experiences are likely to win and keep more customers than those whose experiences continue to include friction — or who don’t offer contactless and digital wallet options at all.

Rafael Laurenco

Rafael Lourenco is Executive Vice President and Partner at ClearSale, a global card-not-present fraud protection operation that helps retailers increase sales and eliminate chargebacks before they happen. The company’s proprietary technology and in-house staff of seasoned analysts provide an end-to-end outsourced fraud detection solution for online retailers to achieve industry-high approval rates while virtually eliminating false positives. Follow on LinkedInFacebookInstagram, Twitter @ClearSaleUS, or visit https://www.clear.sale.

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