If the coronavirus has changed anything about the brick-and-mortar store experience from a technology standpoint, it’s that retailers have committed to providing consumers with more contactless payments options. A survey from the National Retail Federation (NRF) and Forrester found that 67 percent of retailers surveyed now accept some form of no-touch payment, including 58 percent that accept contactless cards that can be waved near or tapped on the card reader—up from 40 percent in 2019.
Additionally, 56 percent of retailers now take digital wallet payments on mobile phones, up from 44 percent last year, the study said.
Since January, contactless payments have increased at 69 percent of the retailers surveyed that employ the option. Among them, almost all (94 percent) say they expect the consumer adoption to continue over the next 18 months.
Among U.S. consumers, 19 percent surveyed via Forrester Consumer Technographics said they made a digital payment in a store for the first time this May. Of those, 62 percent used their smartphone and 56 percent used a contactless card. As many as 67 percent said they were satisfied with the experience while 57 percent would likely continue once the pandemic has subsided.
However, as the adoption of these technologies rises, retailers actually have to do the legwork to ensure consumers know their options. A recent Periscope by McKinsey report reveals that 23 percent of shoppers said they haven’t been exposed at all to contactless and mobile payments options, while 35 percent claim no exposure to technologies including mobile payments, digital screen browsing and augmented reality experiences.
More than half (52 percent) of the 2,500 shoppers questioned by Periscope by McKinsey in early June stated that speedy checkout was an important part of a great purchasing experience, making the visibility of the payments technologies pivotal.
The desire for a safe shopping experience puts the onus even further on retailers. Across four major markets, consumers agreed that finding what they were looking for quickly and easily was a more important factor in the store than it was last year, given their interest in limiting exposure to large groups of people. According to the study, 65 percent of U.S. consumers valued getting in and out of shops quickly, followed by 59 percent of U.K. consumers, 52 percent of German consumers and 47 percent of French consumers. Compared to last year, these numbers jumped 11 percentage points in the U.S., 14 percentage points in the U.K., 10 percentage points in Germany and seven percentage points in France.
Inconsistent transaction fees cause concerns
While the public-facing aspects (or lack thereof) of these technologies may cause confusion for consumers, retailers appear to be more worried about issues more directly related to their bottom line. According to the joint research from NRF and Forrester, 67 percent of retailers that accept no-touch payments are concerned about high costs, including transaction fees.
And rightfully so, especially in the COVID-19 era when more people are shopping online, which is where interchange fees are a tad pricier for retailers.
In the store, banks charge retailers with fees averaging out at approximately 2.5 percent every time a credit card payment is made, regardless of whether the card is inserted, tapped, waved or used via a mobile device. But this fee jumps to 2.8 percent if the same card is used online or over the phone, which has elevated the total fees retailers would have to pay since due to the store closures during the pandemic and the lesser foot traffic in many that have reopened.
“The card industry should not take advantage of this situation to rake in extra fees merchants would not pay otherwise,” said Leon Buck, vice president for government relations, banking and financial services at NRF, in a statement. “Card processing fees already drive up costs for retailers by far too much and ultimately increase prices paid by consumers.”
With consumers increasingly pay online for purchases they’ll pick up in stores, retailers are expected to pay about $1.6 billion more in interchange fees this year, according to payments analysis firm CMSPI.
“Curbside pickup and buy online, pick up in-store transactions are treated as ‘card not present’ online transactions by the processors, so retailers are paying an online rate even when these purchases are picked up at the store,” said Lily Varon, senior analyst at Forrester. “Retailers feel these are really in-store transactions so there’s some pain there.”
Contactless debit card transactions are also costing retailers more because the transactions often have to be processed over networks run by Visa and Mastercard when a PIN isn’t used. CMSPI estimates retailers could save $2 billion a year if more banks that issue the cards turned on PIN-less capability and the transactions could be routed over the lower-cost ATM networks available when a PIN is used.
No-touch adoption leads to security questions
Beyond the high fees, the three next-largest issues that NRF and Forrester found related to contactless payments systems are all tied directly into potential fraud and security matters: 65 percent are concerned about cybersecurity and data privacy risks, 63 percent worry about increased fraud and 61 percent think about increased chargebacks of disputed purchases.
“Touchless payment methods are an important part of ensuring the health of retail workers and consumers but they do raise concerns about the security of payments and the fees charged to merchants to process transactions,” said Buck. “Retailers, banks and card companies need to work together to ensure that these transactions remain secure.”