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CoverStory

One driver of mobile wallet usage is Further boosting the trend, several major metro-
politan transit authorities have deployed contact-
near field communication (NFC), which less payment terminals, including New York, Chi-
allows for the exchange of data between cago and Portland, Ore. The consultancy Strategic
Resource Management is predicting a steep climb
smartphones and POS devices. The biggest in consumer adoption of contactless payments this
impediment, until recently, was a dearth of year. "Offering the convenience of contactless can
book a significant win over the next 12 months
NFC terminals. But that's changing as more simply by enabling this feature within card port-
terminals and workaround technologies folios," the firm said.
emerge to support tap-and-go payments. Financial institutions are tuned into the message.
Several major banks, including Bank of America,
Wells Fargo and JPMorgan Chase, have revealed
(cited by 53 percent), while economic rewards will fall to plans to offer contactless card options this year.
eighth place, tied at 29 percent with "building a commu- Like mobile payments, contactless is a convenience play.
nity among members." Consumers want quick and convenient service, and tap-
ping a card against a terminal is quicker and more conve-
"Today's consumer has a bank branch, a retailer and all of nient than dipping, Grotto noted.
her friends within her reach," said Francis Hondal, Mas-
tercard president for loyalty and engagement. "We need to A July 2019 survey by CreditCards.com and YouGov found
meet consumers where they are, when and how they want 14 percent of rewards credit cardholders have contactless
to engage," Hondal said. "This means connecting them credit cards and have used those cards to make contactless
across channels in a meaningful way, and bringing them payments; 10 percent said they have the cards but haven't
high-value services. These are the building blocks for ro- used the contactless feature to make payments.
bust loyalty programs today and into the future."
Terminal contactless But the big growth will be in contactless mobile payments,
according to predictions by eMarketer.com. "We forecast
One driver of mobile wallet usage is near field communi- that proximity mobile payment users will account for 30.6
cation (NFC), which allows for the exchange of data be- percent of U.S. smartphone users in 2020, equivalent to
tween smartphones and POS devices. The biggest impedi- nearly 70 million people," eMarketer.com said. "That's still
ment, until recently, was a dearth of NFC terminals. But a relatively small number, but as contactless options for
that's changing as more terminals and workaround tech- transit and shopping increase, we expect that number will
nologies emerge to support tap-and-go payments. continue to show healthy increases in 2020 and beyond."

Visa said it is seeing "strong interest" in its "tap to phone" "It's going to happen," Baldwin said. "People have become
program, which turns smartphones into tap-and-go pay- very comfortable relying on their mobile devices to run
ment devices. In early January, Samsung introduced a new their lives." From the merchant's perspective, mobile holds
enterprise smartphone model, called the Galaxy XCover another potential advantage: lower cost payments, Bald-
Pro that features Samsung POS. Visa said it has been pilot- win suggested. "Mobile gives them an opportunity to tap
ing tap to phone in nine countries where contactless pen- into other channels that don't have those [interchange]
etration is high, and that Samsung POS has been used in fees," he said.
at least one pilot. P2P inroads

In a blog post describing the partnership, Visa said the app Mobile-based peer-to-peer payment schemes, like Venmo
is well suited to a variety of industries, including retail, and Zelle, have been making significant inroads, which
healthcare and logistics. Typical use cases include kiosks, will likely continue, and potentially displace some card
food trucks and self-employed professionals. payments. "Bypassing the card networks can make [digital
payments] attractive to micro merchants," Baldwin said.
Programs like tap to phone leverage the growing base
of NFC-enabled POS devices ushered in by EMV. (EMV- Zelle, which is owned by many of the nation's largest
compliant terminals typically have NFC functionality banks, handled 196 million transactions totaling $49 bil-
built in.) Most major retailers, including Target and CVS, lion in the third quarter of 2019. "Today, one in two adults
now support contactless payments, which means as many with a U.S. bank account have access to Zelle in their mo-
as 60 percent of retail purchases now occur at terminals bile banking apps," said Lou Ann Alexander, group presi-
that support contactless payments (initiated by phones or dent for payment solutions at Early Warning Services LLC,
cards), said Sarah Grotto, director of debit and alternative which operates Zelle.
products at Mercator Advisory Group.

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