Technology
How the pandemic solidified contactless payment
Prior to the COVID-19 pandemic, mobile payment uptake was largely driven by convenience. While convenience is still important, the pandemic has put a spotlight on how safe mobile payment is, both from a data security and a public health perspective.
May 4, 2020 by Jessica Shelcusky — Senior Marketing Specialist, Paytronix
Prior to the COVID-19 pandemic, mobile payment uptake was largely driven by convenience. While convenience is still important, the pandemic has put a spotlight on how safe mobile payment is, both from a data security and a public health perspective.
When tightly integrated with a loyalty program, mobile payments help restaurants and retailers capture information about consumer buying habits and, consequently, develop closer digital relationships with customers. In fact, mobile payment and loyalty go hand-in-hand.
While still popular, cash is falling out of favor as more and more people use credit and debit for even small purchases under $10. And in today's pandemic where cash can be a vehicle for virus transmission, people are even more reluctant to use it.
The United States is still in the early adopters' phase of mobile payment. In other parts of the world, particularly Asia and Europe, mobile payments are more prevalent. This is partly because in the U.S. there are different payment platforms and processors running different systems.
Researchers at the University of Illinois studied consumers in China, where mobile payment is more widespread than it is anywhere else in the world. They found that people who use mobile wallets make purchases at a rate 23% higher than those who pay with physical cash or card, and spend 2.4% more per transaction. The reason is similar to why people spend more on credit cards than when they use cash — because the money doesn't feel real.
Here in the U.S., mobile payments are on the rise with 47% of consumers expected to be using mobile payment and digital wallets this year. Approximately half of American stores — about five million locations — accepted Apple Pay in 2018, while about four million locations took Google Pay. The number of stores accepting Apple Pay was up 50% from the year before, and up considerably from the 3% that accepted Apple Pay just five years ago. Smartphone penetration rates are helping this along.
Barriers to mobile pay
The main reason Americans aren't adopting mobile payment technology is the perception that it is not secure, despite the fact that mobile payment is more secure than a credit card. Mobile payments are processed without the transfer of sensitive information. Apple does not store consumer information on their servers, and Google encrypts the financial data they receive. The security measures on the phone itself — face recognition and fingerprint scanning, for example — protect card information in the event of a lost or stolen phone.
With the novel coronavirus' primary transmission being human contact, contactless payment has yet another advantage. As American businesses begin to reopen, informed consumers will be reluctant to touch shared devices like pinpads and payment terminals, and they won't be enthusiastic about handling cash. Contactless mobile payments will become a necessity for public health.
On its website, the Centers for Disease Control and Prevention advises using 'touchless" payment (without money, a credit card or a keypad), if possible. "f you must handle money, a card, or use a keypad, use hand sanitizer right after paying," the center advises.
Restaurants and retailers need to be ready for this seismic shift in payment technology. There are going to be different solutions that might work for different concepts from convenience store, to quick service restaurant or full-service restaurant.
Here are three options that, when integrated with loyalty, can help brands take advantage of all that contactless payment has to offer.
1. Pay at table
It's a great solution for restaurants that want to offer a touchless payment method for their customers. When guests check-in through their app, their bill automatically is associated with their phone, so there is no reason for a server to touch the guest's check, card, or cash.
Pay at table also delivers convenience. According to an article from Mobile Payments Today, 69% of restaurant goers find waiting for the check the most frustrating part of the dining experience; on average, it takes 12 minutes to pay from the time a guest requests the bill. Pay at Table allows guests to pay for their meal when they're ready, on their own time schedule without that waiting period. They do it all from their mobile device.
2. Stored value
This works best for quick-serve concepts like coffee shops, where guests make small, frequent purchases. By pulling up a scannable bar code or QR code on their mobile device and holding it in front of a scanner, customers pay without touching any shared surfaces. It's convenient and safe. Stored value includes features like auto-reload so that guests never have to worry whether they have enough money to cover their morning caffeine fix.
Starbucks was the first to really break through and make this more than just a fad, but an accepted way of life for most people. Because of the size and effectiveness of their loyalty program, more money is stored in Starbucks at any given time than in many major banks.
Other coffee chains like Dunkin' and Peet's have adopted the same premise. And when guests have money stored with a brand, visits among these guests increase because they've already made a commitment to keep coming back.
3. NFC Smart ID
Combining both mobile payment and smart ID, NFC (Near Field Communications) ID payment is provided by both Apple Pay and Google Pay. Guests simply tap their phones both to pay and to use their loyalty card. With zero physical contact, it's the ideal payment method for today's public health situation.
The loyalty software automatically calculates progress to rewards and enables real-time reward redemption. Easy identification, payment, and redemption leads to more active users, a broader, richer individualized guest purchase data set, and the ability for the merchant to drive incremental revenue with targeted offers.
NFC Smart ID also secures data transactions: when a customer links a credit or debit card to Apple Pay or Google Pay, the actual card numbers are not stored on the device, or on the Apple or Android servers. Instead, each transaction is authorized with a one-time, unique, dynamic security code.
Guests pay using Apple or Android mobile devices or watches in just one step. This helps speed up service in restaurants, eliminating long lines of guests. Guests who aren't already enrolled in a loyalty program can be prompted to sign up as part of the transaction, making it a quick-and-easy enrollment tool as well.
There are still barriers to NFC payment becoming completely touchless, like certain POS systems or bank and merchant regulations. Many credit and debit card purchases, including those above $50, may call for manual PIN entry due to the traditional chip-and-PIN approach to EMV. Banks in some countries — including Denmark — recently raised the cumulative limit for contactless payments with a debit card to minimize the need to enter a PIN during the outbreak.
NFC payment is likely to increase in popularity, especially in this time when everyone is looking for ways to minimize physical contact throughout the shopping experience. Combining loyalty and touchless payment will give restaurants and retailers the ability to engage and enroll guests both quickly and safely.
About Jessica Shelcusky
Jessica Shelcusky is a marketing communications specialist with Paytronix, where she creates content to help restaurants and convenience stores connect with their customers. Prior to joining their team, she received an MBA from Boston College and worked for several years in the retail industry.
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