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The rise of contactless cards in the UK

A London Business School professor recently made the rather dramatic claim that parting with cash is “psychologically painful”, but that paying for items with a contactless card “anaesthetises the psychological pain that accompanies payment, seducing us into splashing out”. In fact, according to the UK Card Association, £3.9bn was spent in the UK in April 2017 using a contactless credit or debit card – an increase of 147.6% on the same month the previous year.

As of summer 2017, card payments had overtaken cash and coins as the country’s number one payment method. In its latest annual survey, the British Retail Consortium described plastic’s position as ‘firmly established’ as the country’s go-to instrument for paying for their shopping. The figures above suggest that this is at least partially down to the UK’s widespread adoption of contactless cards.

Since they were introduced a decade ago, contactless card popularity has grown to the point where they account for around a third of all card purchases – up from one in 10 in 2015. While this growth is impressive, it is hardly surprising. In the UK, cards have been traditionally used for higher value purchases and cash for low value, but now consumers are utilising contactless for the payments that they would previously have made with cash – due, in part, to the convenience of ‘tap and go’.

Initially, the rollout of contactless cards was met with a lukewarm reception, marred by fears around data privacy and the risks associated with cards being stolen. However, since then, talk of risk has subsided and the convenience of ‘tap and pay’ has permeated pretty much every aspect of low value shopping; from buying travel tickets to groceries.

Perhaps the most significant step in contactless adoption in the UK was in 2014, when debit and credit cards using the technology started being accepted on London’s underground transport network. Transport for London became the poster child of contactless – from Oyster cards to contactless payment cards and, more recently, NFC. It made sense for TfL to push the contactless envelope, as every time a card is tapped at the turnstiles it reduces queueing times at the ticket machines, as well as reducing TfL’s cash handling costs.

The challenge subsequently was how to grow the popularity of contactless nationwide – something that continues to this day to a much lesser extent. Part of the issue was that people living in the UK’s larger cities were prioritised, while different issuers had different timeframes for making their customers contactless, resulting in a far from universal rollout. There were also difficulties on the merchant side – upgrading POS terminals, installing software, producing new signage and pushing contactless consumes a great deal of time and resources, particularly in the adoption of an as-yet-unproven technology. Because of this, some major supermarket chains didn’t roll out acceptance points in-store until as recently as late 2016.

However, the growth of contactless cards has still been undeniably rapid thanks to their overruling convenience. Research from ClearScore suggests that contactless cards make consumers spend more money in-store which, coupled with the availability and variety of smaller and cheaper contactless POS terminals, makes this payment type an attractive proposition for merchants of all sizes. When you combine this with more recent innovations like the introduction of contactless ATMs, as well as an inevitable raising of the contactless limit in the near future, this growth is unlikely to slow any time soon.



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