For the past 10 years, we’ve been hearing about how new-generation mobile apps, wallets, tap-to-pay, NFC solutions and even the humble QR code are going to spell the end of the magnetic stripe card as a means of payment. And here we are, in 2022, and we’re finally taking big steps towards a brave new world of contactless payments.
In fact, contactless payments are possibly the hottest trend in the financial services industry right now. Globally, Accenture predicts US$7 trillion in consumer spending will shift from cash to cards and digital payments by 2023. The Deloitte Africa Digital Commerce Survey found that 22 million South African consumers shopped online in 2020, growing to 32 million by 2024.
Mastercard has become the first major payment provider to start phasing out the magnetic stripe on its cards. By 2033, no Mastercard credit and debit cards will have magnetic stripes. In fact, physical cards are steadily being replaced by virtual cards, which are both safer and more secure.
As businesses scramble to adapt to a world of reduced cash and physical card transactions, we see the major advantages for contactless over old-school payment methods:
Germ-free, easy transacting
Contactless was initially all about ease of use. With Covid-19, the ‘no-touch’ aspect became the big winner. Using contactless methods to accept payments means there’s no need to handle cash or a card. Depending on the technology, there’s no need for customers to physically interact with a point-of-sale (POS) device, enter a PIN or sign a receipt.
It’s safe and secure
We’ve all heard horror stories about card-skimming. You think you’re swiping your card for that latte, and next thing you’re seeing unexpected transactions going off your account. With mobile wallets and virtual cards, you don’t even need to carry your bank card, and the merchant doesn’t see any card or banking details. With QR codes, which remain popular, each QR code is randomly generated, ensuring your personal information always remains safe.
They bring more people into the digital economy
As more digital payment solutions come to market, we’re seeing growing numbers of South Africans participating in the digital economy for the first time. And with solutions like QR codes, merchants don’t even need specialised hardware or POS equipment: the technology needed to enable QR-based payments is typically software-based, which makes it simple and quick to implement and allows merchants to offer a better checkout experience. This is going to be a huge advantage for the informal sector and micro-businesses.
It goes beyond the payment
Contactless payments don’t just create safe transactions: they add an entire new layer of brand benefits. The speed and ease of contactless payments allows brands to create better service for their customers with fewer abandoned transactions. Anything they can do to simplify the customer experience and reduce transaction time is a win. On average, it takes 6 to 7 seconds to process a cash transaction. This is reduced to 1 to 2 seconds for contactless. It doesn’t sound like a lot, but the difference it makes to customers is huge.
The research is overwhelming: South African consumers want the ability to make contactless, easy payments. And they want it now. Merchants that ignore the benefits of contactless payments do so at their own peril.