Published: March 3, 2020
The coronavirus outbreak is occurring during the largest and most aggressive period of contactless card issuance in US history. Large credit and debit card issuers are making multimillion-dollar investments to reissue their portfolios, and have already put more than 300 million cards into the US market with dual-interface (e.g., chip and contactless) capabilities. Their objective is largely to displace cash usage by increasing the attractiveness of cards as an alternative for low-value transactions.
451 Research finds that 98% of consumers have used cash for a purchase in the last 90 days, making it the most widely used payment method in the US by a considerable margin. Somewhat serendipitously for card issuers, cash is quickly coming under fire as a high-risk vehicle for spreading the coronavirus (COVID-19), given its widespread use and inherent person-to-person qualities. Hard-hit countries like China have begun disinfecting their national currency and keeping it stored in isolation for up to 14 days prior to recirculating. The precautions aren't unwarranted. According to a 2002 study executed by researchers at Ohio's Wright-Patterson Air Force Base, 94% of banknotes tested contained bacteria, including some contaminated with deadly pathogens.
Card marketers at US financial institutions will like the recent guidance given by the World Health Organization. In a recent interview with The Telegraph, a WHO spokesperson proclaimed, "When possible, it would also be advisable to use contactless payments to reduce the risk of transmission." Indeed, the coronavirus may prove to be a unique messaging opportunity that banks can harness to encourage contactless card take-up. This could be particularly useful for converting the two in five cardholders that we find possess a contactless card but are not yet using the tap-to-pay capability. It could also be beneficial for changing the minds of the 37% of cardholders that don't yet have a contactless card, and don't plan to make tap-to-pay purchases if/when they receive it.
Over the next several months, we expect opportunistic card issuers – and networks – to build marketing messaging around the sanitary benefits of contactless payments. This is most likely to occur first in metro areas, especially in those like New York that are undergoing a transition to open-loop contactless ticketing in their public transit systems.
An Associate Analyst in 451 Research’s Customer Experience & Commerce Channel, Cam O'Shaughnessy covers the digital commerce ecosystem, including e-commerce, mobile payments and omni-channel commerce. Additionally, he contributes to the design and writing of the consumer insight-driven VoCUL (Voice of the Connected User Landscape) Digital Wallets survey product.
Jordan McKee is a Research Director for Customer Experience & Commerce, and also leads 451 Research’s coverage of the payments ecosystem. He focuses on digital transformation across the commerce value chain, with an emphasis on the major trends impacting payment networks, issuing and acquiring banks, payment processors and point-of-sale providers.
Csilla is a senior analyst for 451 Research’s Data, AI & Analytics channel. She currently focuses on decoding the blockchain market to help replace confusion and complexity with an examination of the technology, the competitive landscape and available solutions that are driving the market, as well as real-world use cases and deployments.