The growing need for contactless payment

Public health concerns push more businesses to adopt new transaction solutions.

By WP BrandStudio

In mid-March, as the effects of the coronavirus pandemic began to reverberate through the economy, a large Real Estate Investment Trust (REIT) encountered a new type of problem. One of its long-time retail tenants had started to experience cash flow constraints due to being closed to the public and needed to shift their rent payment type from check to credit card. There was just one problem: the REIT wasn’t equipped to accept credit card payment of any kind.

“In some verticals, like commercial real estate, enterprise industrials and business-to-business, there’s a reluctance to accept credit cards,” says Jessica Miglioretti, Vice President and Solution Consultant at KeyBank. In today’s unprecedented environment, that reluctance has quickly melted away. The REIT turned to KeyBank for help. “We were able to get a secure browser-based virtual terminal to them within days. Not weeks, not months—but days,” says Miglioretti.

Revenue began to flow as usual again, and the company was able to enhance its reputation with a valuable customer by being responsive to the current conditions. Now it’s a payment option the company can offer other customers and enable faster and more efficient payment in the future.

“Contactless payments have gone from just a nice thing to have to being the only way you can do business,” says Deepak Kapoor, Senior Vice President and Head of Merchant Services with KeyBank. And the benefits go beyond public health. Contactless payments create speed and efficiency for merchants, lower cash handling costs, provide dynamic security measures, drive customer loyalty, and can even increase customer spending due to ease and convenience.

Having the necessary tools to transition to contactless payments is vital for businesses in 2020—not just to continue operations amid a public health crisis, but to benefit the bottom line in the long-term.

A growing trend gains momentum

Contactless payments have already demonstrated a stable growth path. Studies have shown that the global contactless payment market was expected to grow from $10.3 billion this year to $18 billion in 2025—an 11.7% year-over-year growth rate. Even so, only about a quarter of all transactions are digital, with the U.S. significantly behind the rest of the world in rolling out contactless options.

A lack of infrastructure, security concerns, and general lack of awareness can all contribute to slow adoption. But as a public health crisis rages on, businesses have reached a tipping point in payment solutions, and demand for contactless options is likely to grow—if not become completely necessary to stay in business.  “We expect to see an increase in average spend, accompanied by a longer term boost in adoption,” predicts Juniper Research analyst Susannah Hampton. A recent study by Deloitte asserts that this is a step that must be taken in 2020 to meet demands across industries. Building out digital infrastructure and platforms will be key.

New research has found that the current global pandemic is having a major impact on the use of credit and debit cards, as the World Health Organization has urged people to shift to contactless payments to avoid exposure to the novel coronavirus. In March alone, online payment transactions rose by 74%. Opting for digital or contactless payment options is expected to outlast the pandemic.

Of course, the pandemic isn’t the only catalyst in this trend. Deloitte’s study revealed that supplier payment methods are a major pain point in the B2B payments landscape, and buyer decisions can be heavily dependent on which payment methods their suppliers use. And as customers become more accustomed to the convenience of contactless payment, that demand will increase.

Several emerging technologies are enabling businesses of all sizes to meet this demand. The most widely known and accepted are credit cards or key fobs embedded with a near-field communication (NFC) antenna. Radio waves from this technology create a dynamic, one-time code for each transaction—ensuring a secure way to make a payment by merely waving the chip over a reader at a point-of-sale terminal.

Mobile payments and digital wallets—such as Apple Pay^®, Samsung Pay or Paypal—are also gaining traction. These services store customer banking information to make e-commerce payments quicker, and eliminate the need to cut checks or swipe cards at point-of-sale. These solutions are particularly beneficial for e-retailers to streamline payments and operations, as is a cloud infrastructure, which creates efficiencies across digital payments at the enterprise level.

Much of the appeal for contactless payments stems from the convenience, both for the merchant and the customer. “Contactless payments allow you to cut the transaction time in half,” says Matt Marscher, National Sales Manager, Merchant Services with KeyBank. This increased efficiency can contribute to an enterprises bottom line, in addition to cutting cash or check handling costs.

Contactless payments also have greater security protocols than traditional methods.

“The card data is being protected at all times,” explains Miglioretti. “The encryption happens when the transaction is in transit and the tokenization protects the card when it’s at rest.” What’s more, consumers typically need to unlock their phones or employ biometric authentication in order to use their digital wallet, making them a more secure option than cash or traditional credit cards.

From convenience to implementation

The most common barrier to adopt this preferred payment type is infrastructure. Because of large, complex technology stacks, large enterprises can struggle with hardware configuration, despite a commitment to provide customers with a preferred payment option. “Large national merchants are not attracted to the thought of having to completely overhaul or replace the technology they already have,” says Miglioretti. “We as a financial institution have to give them an easy way to do this.”

Implementing dynamic payments will include several steps. A 2020 payments trends study by Deloitte showed that as the contactless payments industry gains this momentum, enterprises are shifting their focus to modernizing infrastructure, investing in cloud computing to address evolving customer preferences and engaging in targeted mergers and acquisitions to add capabilities in payment experience, multi-payment integration and larger B2B payments.

The good news is that the tools are readily available for businesses in any industry to adopt contactless payments in virtually any environment, whether online, at point-of-sale or over the phone. “Many point-of-sale terminals are already equipped with the hardware capabilities, so it’s just a matter of software,” explains Vaduvur Bharghavan, CEO of Ondot Systems, a credit card services platform.

Smaller and mid-size enterprises may be more agile and able to make the jump into contactless payments without the burdens of legacy technology—but still with a big merchant feel. They can also leverage this same technology to maintain operations and revenue as the country largely shelters at home.

One option is the Clover^® suite of solutions. These provide a way for businesses to get a plug-and-play system to quickly implement contactless payments, a particularly attractive solution for retailers. Over the last few months, KeyBank has helped businesses like restaurants leverage this technology. When many states shut down non-essential businesses in March, KeyBank could help restaurants and retailers to leverage the Clover app market and enable the ability for consumers to place orders for delivery and pick-up.

As more consumers move in ever greater numbers toward digital payments they will expect the businesses they interact with to accommodate them. “You see people who don’t carry cash now,” says Marscher. “The next step is consumers that aren’t carrying cards and are walking into a business with their phones and expecting to make payments. It’s going to become a necessity.”

Seeking out a merchant bank with a deep well of solutions and expertise can ensure a successful rollout of a payment platform customers want, particularly at the enterprise level, where implementation into a complicated infrastructure takes the kind of expertise that an experienced partner like KeyBank can offer.

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Sources: KeyBank, Markets and Markets, Pulse Network, AT Kearney, The Business Research Company, ACI Worldwide, Deloitte

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This content is paid for by an advertiser and published by WP BrandStudio. The Washington Post newsroom was not involved in the creation of this content. Learn more about WP BrandStudio.