The Global Adoption of Contactless Payments: Trends and Challenges

Contactless payment is exponentially growing worldwide. In 2020, the payments market received contactless payments worth $10.3 billion, in the year 2020. Experts say it will increase to $17.9 billion before 2025 ends.

Are you intrigued to know more about it? 

Contactless payments use smart software and hardware to increase transaction security. But its demand surged when people started giving up the habit of using cash. Nowadays, small convenience stores also accept contactless payments.

Are you now thinking about what is so different in it? Well, it is different because of the unique techniques like NFC that are used in it. However, contactless payments are rising so fast due to biometrics. Biometrics-enabled chips can be inserted into cards, wearables, and phones.  

Contactless cards and mobile phones are mostly used in the USA to make payments. But globally, tags and wearables are in use. This study loops in the biggest challenges in implementation of contactless payments.  

Dynamic Factors Behind Global Adoption of Contactless Payment Options

Among many drivers, the implementation of contactless payment faces some obstacles. To know if it’s scalable or not, a detailed study of both trends and challenges of implementation follows.  

Trends Driving the Growth of Contactless Payments 

Experts say that the EMV chip technology takes time to process the payment. But the contactless payment makes the friction redundant. It directly approaches the bank’s ecosystem to make a payment request or debit.

Most malls and department stores use this technology. As a result, they reduce the customers’ payment time. So. Customers must stand in queues for a shorter time.  

Contactless payments have a strong use case in retail and hospitality. Moreover, it is very easy to pay using contactless payment options. People don’t need to carry cash if they’re using it. They can also simply pay with their phones.  

As a result, we don’t use it for shopping only. Contactless payment options are equally used for in-person payments.

Contactless payments also make it easy for merchants to handle payments. The money is deposited directly into their bank accounts. Moreover, they are relieved from handling petty cash.  

Using contactless payments, you can serve more customers in a shorter time.  

Trends Hindering the Growth of Contactless Cards 

Of all challenges in implementation, the high cost of NFC devices is the biggest. You need an NFC-enabled reader to accept contactless payments. Micro businesses cannot afford the devices in many countries. 

Many merchants do not have the technical know-how to handle or maintain the technology and hardware of contactless payments. Experts say you can incur spiraling expenses if you invest in contactless payment without thinking much.  

More Critical Challenges

The security standards of contactless cards are not maintained equally everywhere. Even countries like the UK have faced losses due to the lack of strict operating standards in contactless payments.  

People have many cashless payment options at their disposal. So, there is a lack of education about why they should prefer contactless payments.  

In the developing countries of Africa, many customers do not have bank accounts. So, it is impossible for them to use contactless payment technology. Moreover, many customers in developing nations do not use smartphones. This population cannot use contactless payments as well.  

The regional trends show that there is a scalable growth of contactless payments. However, these problems arise when you consider the global picture.  

Central banking institutions are responsible for educating citizens about the benefits of contactless payments. The USA is planning to launch the central bank’s digital currency. It is a digital alternative to paper money.  

It can be easily exchanged through contactless payments. However, countries with low GDP, like Sudan, Zimbabwe, or Tanzania, cannot afford such measures.  

Regional Trends in the Growth of Contactless Payments  

The spread of contactless payments varies across regions. I have tried to briefly capture its expanse in selected countries.

Far East

Research shows that far eastern Asian countries are the most advanced regarding contactless payments. The adoption rate of this payment system is the highest in this part of the world in the last four years.  

Europe

However, trend analysis also reveals that Europe could dominate in the future. Countries like the UK, France, Spain, Sweden, and Norway can show the way in which contactless payments are made to the world.  

However, over 40% of the big transactions in Germany are made in cash. Therefore, the overall growth of contactless payments in Europe can be interrupted.  

America

After the Far East, America is the next big market for contactless payments. In the USA, 75% of cashless transactions occur at any of the contactless terminals. Moreover, 265 out of 300 merchants have enabled this payment option in their stores.  

Australia

Australia has shown massive growth in using contactless cards in recent times. 2017 about 92% of the visa transactions were already contactless in Australia.  

United Kingdom

The UK is considered one of Europe’s business hubs. At the same time, the UK attracts many tourists every year. To make payments easy and fast, contactless payments are the best option in the UK. More than 1 billion travelers use Visa contactless cards in the UK.  

The best thing in the UK is that 85-year-olds pay with contactless cards now. After the pandemic, their awareness increased. At the same time, the utility cases of contactless payments increased.  

Hong Kong

In 2017-18, Hong Kong exhibited the highest growth in contactless payments. Now, 1 of 3 face-to-face visa payments are contactless in Hong Kong. 

Brazil

Brazil made contactless payments over USD and local currency equally easy. In 2021-22, Brazil witnessed a 187% hike in the use of contactless payments in the domestic market.  

Canada

Since 2017-18, Canada has also witnessed exponential growth in contactless payment options. Canada uses contactless credit and debit cards more than the digital wallets.  

However, many wallet and card options exist in Canada, like the USA. However, most merchants prefer to transact in cash.  

They think that personal data is not exchanged that way. Therefore, the Canadian government and the central bank must take the initiative to spread financial literacy.  

To target the younger generation, newsletters, blogs, and social media posts can be used. They can inspire others to use contactless payments, too.  

Regional Challenges in Implementation 

It is difficult for someone in Norway or Sweden to fathom that Egyptians and Germans prefer cash transactions over anything else. Countries like Romania, Egypt, Ukraine, Morocco, and Hungary also think similarly.

The biggest challenge in this case is the lack of bank accounts. In Norway, all citizens have a bank account. However, in Romania, 42% of the people do not have a bank account. Research shows that people without bank accounts have less interest in and knowledge of contactless payment options.  

Case Study of Germany 

Germany is one of the most progressive and forward-thinking countries. In Europe, the average adoption of contactless payments is much higher.

According to Germans, all alternative payment options have flaws and may incur technical issues. However, according to them, cash is the best way of paying anonymously and hassle-free.  

There are two other important factors. There is a negative interest rate in the banks of Germany. As a result, people do not want to bear the extra cost of contactless payment. They also want to avoid the annual maintenance cost of contactless payment subscriptions.  

Wrapping It Up……..

Many countries like China, Norway, the UK, and others have set examples in adopting contactless payment. However, there are many countries where the adoption rate is exceptionally low. 

After analyzing the common problems, I found that income disparity exists in many countries. That is why most citizens of countries like Romania do not have any bank account.  

I saw that the behavior of merchants is very important. In countries where merchants use contactless payments, people also generally use it. I also found that a lack of financial literacy is a problem. Due to this problem, many people are not aware of the safety of contactless payments.  

There are other challenges in implementation, too. In countries like Germany, people avoid the extra cost of online payment services. But countries like the USA show much enthusiasm but less contactless transactions.   I believe merchants and users should be equally aware of the benefits of contactless payments. Only then will we see better growth in its rate of use.

For More Financial Articles Click Below!!

• Contactless Payments and the Cashless Society: Are We Ready?
• Personal Financial Statement: What Is It? How It Can Be Created?
• The Evolution of Contactless Payments: Transforming the Future of Credit Card Transactions