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June 09th 2020

The Contactless Catalyst: Five Questions with CJ Brown

With the need to minimize contact to avoid spreading the virus during the pandemic, card networks having been reporting an increase in contactless transactions of over 40%.


While this has ongoing benefits for both consumers and merchants, an increase in contactless transactions isn’t as straightforward as it may seem. CJ Brown, CMSPI’s Technical Consultant, offers insights into the success of contactless pre-COVID; the opportunities the payment method presents; and the technical complexities that come in-hand with implementing it.

How was contactless represented in the U.S. payments mix prior to the pandemic?

Prior to the pandemic, the use of contactless has been low in the U.S. – even with the likes of Apple releasing mobile wallets and issuers beginning to distribute cards with contactless capabilities. Unlike countries where contactless has a wider representation, such as the UK, there hasn’t really been any catalyst to steer consumer behaviour towards contactless.

There are multiple factors contributing towards this historically limited uptake of contactless. Whether it’s because consumers don’t know how to use it; or they’re not able to because merchants aren’t supporting it; or they don’t have a card with contactless technology, ultimately contactless in the U.S. has significantly lagged behind other key markets. These issues are compounded by the fact that, unlike the shift from magnetic stripe to EMV chip authentication, there is no chargeback liability pressuring businesses to support a movement towards contactless.

How has the pandemic changed the way consumers choose to pay?

The starkest way in which consumers have changed the way they pay is that they’re not going into stores as much – which is to be expected with widespread store closures and stay at home orders during the beginning of the pandemic. For some retailers, we’re seeing cases where they go from processing several million in store transactions a month to a couple hundred thousand. In order to protect themselves, consumers have moved away from purchasing in-store and shifted towards the online space.

As a result, we’ve seen Card Present transaction volumes drop off significantly, with the exception of essential industries like grocery where volumes have stayed the same. In the media, we’ve seen retailers pushing towards trying to make the in-store experience feel safer, which is where the conversation around contactless arises.

What are the opportunities and technical complexities surrounding the rise of contactless transactions?

In order for a merchant to accept contactless they need to have a NFC (Near Field Communication) capable device – this is how the terminal communicates with the card or phone. In addition, merchants must also have contactless certifications completed with each of the major card brands – Visa, MasterCard, Discover and AMEX. Retailers also need to set cardholder verification method (CVM) limits and decide a transaction limit, if they want to implement one – this would be an amount where anything above it would push the consumer back to chip. Currently, there is no limit requirement for the latter in the U.S. If that’s all been done, it’s just a case of enabling the devices and ensuring they are working when live in production.

In order to increase volumes, at least in the current environment with COVID-19, merchants must look to shift the in-store experience to limit as much contact as possible at the checkout. If the customer is going into a store and purchasing items, the ability to take out their phone and tap it near the device, without having to touch it, could make them feel safer. This is going to be in the minds of many consumers, especially for those who become better educated about contactless and how they can utilize it – even if they don’t have a contactless card – by leveraging their mobile phones.


"Consumers throughout the world like contactless as it's generally relatively fast, or at least creates the impression of being fast, as the consumer doesn't have to insert their card into a device, wait for it to finish the transaction and pull the card back out. Since 2015, Americans especially have had a little bit of anxiety around inserting their card as the transition away from magnetic stripe created the impression it's taking longer, even if that isn't actually the case. Despite contactless alleviating some of that pain, it hasn't really taken off in the U.S. yet."

CJ Brown - Technical Consultant

How will increased contactless volumes impact merchants’ costs?

Inherently, there’s not really a cost difference for a like-to-like transaction for contactless – at least not one we’re seeing today. If you’re performing a PIN transaction with contactless, it’s going to cost the same as doing an identical transaction on the same card but with chip. Our concern comes with how contactless impacts merchants’ ability to utilize PIN and take advantage debit routing with contactless, which is a lower cost route, both in the contactless card as well as the mobile wallets space. With contactless, one of the perks of creating this more streamlined customer experience is the ability to not enter your PIN, and just tapping your card for a low value transaction – especially as seen in other countries – and then being able to walk away.

What that means is, for example, if I’m a merchant and I set the CVM limit to $50 and a consumer comes in and performs a $30 transaction on a debit card, that transaction is going to end up being processed without a PIN – making it more difficult to route to debit, if it’s even possible to. Instead, that transaction as a PIN transaction would have been able to be routed to a lower cost network.

There are some technology solutions which can assist with this, such as PINless debit, but there are still some issues there in terms of supply chain capabilities – such as certain processors not having the proficiencies in place, or merchants not having the certifications or work implemented to support PINless debit. Even if a PINless solution was supported, some issuers still aren’t enabling cards with contactless technology. Our biggest concern on cost is how it impacts merchants’ ability to convert transactions to debit, in line with the expected customer experience coming from contactless transactions.

What new payment methods should merchants expect to see, and how should they prepare for them?

Merchants who have been traditionally in the Card Present space need to consider the impact of accepting payments in ecommerce. It’s a large change in business operations, going from consumers shopping in-store to now potentially delivering products. If the pandemic does turn out to be a catalyst towards contactless, the reality is a lot of consumers in the U.S. still don’t have contactless-enabled cards. We’ll have to see what happens over the next couple of months, but if consumers do eventually have a preference towards contactless, they may only be able to do that via mobile devices.