The Rise of Digital Wallets: A Key Player in Contactless Payments

April 22, 2024

contactless payments in the us

Contactless payments in the us started in 2014. Now you are well versed in it. But it was something very innovative at that time. Did you know that EMV played a crucial role in popularizing contactless payments in us? 

They issued contactless payment cards for various Points of sale till 2018. VISA Inc. observes that in 2018, only 1% of debit card usage was contactless. But now, 1 out of 10 payments in the US are contactless. 

The use of these contactless cards increased during the pandemic. I believe banking partners found a new target market for contactless payments in the US during the pandemic. 

Many new NBFCs emerged in the US market. At the same time, payment gateways accepting contactless payments in the US also increased. I find it easier with mobile wallets. Not only is the time taken for contactless payment in the us is less. It’s safer too. Do you think the same way? 

Factors Driving Contactless Payments in the US

Factors Driving contactless payments in the us

Contactless payments are faster and more secure than traditional payments. But the pandemic made it actually popular.

Convenience and Speed of Contactless Payments

People found transactions through contactless cards easier. That’s why PayPal found that the use of contactless cards increased more than mobile wallet payments. But mobile wallets offer two-point security checks before payment. However, tap and pay cards have built-in security checking features. It takes only 2 to 3 seconds to complete a contactless payment. 

However, mobile wallets were forerunners to contactless payment in the US. However, It is the biggest demerit of tap-and-pay cards is that they might get stolen. The convenience of touchless pay also increased as 265 out of an average of 300 merchants have now enabled QR for mobile wallet payments. 

Security Features of Contactless Payment in the US

I was worried about the security of my bank account in case I lost my card. But most banks and NBFCs solved this issue. The mobile wallet directly pays from my account. 

There is no bar on minimum pay limits. Merchants in the US accept it for payment of a few cents, too. Above all, nobody can open my mobile wallet app without my UID or fingerprint. I can enable and switch off the contactless feature at will, too. 

Impact of COVID-19 on Accelerating Contactless Payment Adoption

Contactless payment in the us emerged wholly during the pandemic. Before the pandemic, the permissible transaction limit through a wallet gateway was only $100. However, the central bank increased the allowable limit to $250 from FY 2019-20. 

Comparison with Other Countries

Comparison with Other Countries

America is increasing its share of digital payments. But Australia has already championed it. The US can improve in some areas easily.

Comparison with Mature Contactless Markets Like Australia, Canada, and the UK

The US is far behind Australia in the evolution of contactless payment gateways and enabling touchless payment options for merchants. Instead, Australia has made 90% of FTF transactions contactless. 

Above all, Australia leveraged contactless payments through NABs. These wearable devices have blockchain-enabled blockchain-enabled security features that allow faster and more secure payments. 

Contactless payments are the latest disruptive thing in Canada. In FY 2022, contactless payments in Canada increased by 11%. However, the USA has scaled more contactless payments during this period. In the same FY, the USA marked a 50% rise in the rate of contactless payment. 

The main difference between American and Canadian approach is that the former relied on contactless debit cards. However, Canada depends on QR payments, tap and pay cards, and mobile wallet payments equally. Australia won the race here by introducing NABs as wearable contactless payment devices.  

Factors Contributing to the Rapid Adoption of Contactless Payments in Other Countries

 Universal acceptance and security are the main factors that prompted other countries to accept contactless payments. America was doubting the security of mobile wallets and promoted cards with “tap-and-pay”. 

Europe enabled wallet, QR and merchant card (with tap and pay) across all Eurozone business transactions. But I also feel that cashback and token rewards have been a distinguished factor. Apple Pay was recently popularized in America. Lately, Garmin has introduced it on a larger scale in the USA, too. 

I believe that the recent disruption in contactless payments in the us is mainly due to the multi-channel policy. In FY 2022-23, there has been a 50% incremental growth in its adoption. It would only increase manifold in the future. 

Technology and Implementation

Technology and Implementation

Contactless payments work over an easy encryption method. You will be amazed to know how simple it is!

Explanation of How Contactless Payments Work

The simple and secure methodology of contactless wallet payments is responsible for its popularity. MY QR has built-in RFID technology. It creates an impact field to track encrypted codes in the vicinity, trying to access the same blockchain-enabled pathway. 

It’s just a matter of facing my wallet QR against the merchant QR. However, my universal payment ID can be accessed through my phone number or a unique digital address. It is like an email address only. 

I searched that Googe Wallet was the first to offer all these features. Contactless digital cards issued by Mastercard also work the same way. 

Implementation of Contactless Payment Options in Retail and Food Service Establishments

The increase in options for contactless payment in the us happened during the pandemic. A Mastercard survey found that 51% of Americans now use mobile wallets to pay for retail purchases. The proportion of payments is the same for online and offline purchases. 

Brands like Target in the USA leveraged digital wallet payment options in 1800 US outlets in 2019. However, more stores are adding this feature exponentially. At the same time, food deliveries in the USA mainly collect payment through digital payment apps. CNBC also found that 36% of the QSR gateways in the USA have wallet pay options.  It will increase with time. 

Expansion of Contactless Payment Technology to Small Businesses and Transit Systems

Your small-town pizza store or a Girl Scout selling Snickers or cookies also accepts payments through digital wallets. It’s easy to set up. There is no subscription charge for merchants setting up the payment gateway. 

 To spread digital payment, PayPal launched the Venmo payment gateway. It is also used by the smallest enterprises. As a result, the microfinance transactions are covered under the encrypted digital wallet payments, too. Above all, you only need a mobile to accept your payment. I can also pay with my mobile only, at any shop. 

Payment Methods for Contactless Payments in the US

Payment Methods for contactless payments in the us

More payment apps and gateways are being added every day. Naturally more vendors can accept payments now. But is it safe to use these dynamic payment methods?

Overview of Contactless Credit Cards

Since 2019-20, many credit cards come with a contactless strip. But you may think- is it safe? The issue is that it can get lost. After that, anybody can make a payment with my card. But is it so? 

Most issuing banks in the USA do not transmit users’ card data to the merchant gateway. However, an OTP or a token (click-to-pay) is issued. Therefore, I can only pay once I authorize the payment from my phone.  

Introduction of digital wallets like Apple Pay, Google Pay, and Samsung Pay

Apply Pay NFC provides the highest security of digital wallet payments. However, Samsung Pay has also recently launched its digital payments app in the US market

If you have any banking features like a credit card debit card or account number and IFSC only, you are eligible for Samsung Pay. On the other hand, Google Pay creates an encrypted payment authorization with your bank when you register. 

All these gateways use similar technology. But Apple Pay is most reputed in the USA.  

Future Trends and Opportunities

The future diversification of contactless payments is capturing speed. America can champion contactless payments by including smaller businesses in the cycle too.

Predictions For the Future Growth of Contactless payments in the US

Experts have studied that the market of contactless payments will flourish more. By 2025, the estimated market size of contactless payments would be $18 billion. However, I believe that all vendors should seriously consider the payment failure issue. The failure rate during payments should go down, as the gateway becomes more popular. 

Potential Benefits of Contactless Payments for Store Loyalty Rewards

Apps like Apple Pay offers 2% daily cash back on usage. I have been brands like Walmart partnering with them to increase the rewards. Such schemes no doubt increase the popularity of digital wallets. 

Opportunities For Further Innovation in The Contactless Payment Industry

The strength of RFIDs used in wallet payments can improve in the future. The speed and range of QR payments can increase too. As a customer I expect more safety over higher payments. 

Wrapping It Up….

Payments through digital wallets in the USA s on the rise. You will see more shops and individual vendors accepting e-payments in the future. Apple Pay, Samsung Pay and Google Wallet are as effective as PayPal Venmo or contactless digital card in USA. The patronage of the central bank will increase contactless payments in the us.  I expect cash payments to be replaced with quicker payment options like digital wallets. The growth scope suggests that mobile wallets are gaining popularity swiftly. New wallet options and mobile payment apps are emerging in the USA. But the question remains, can it be safer?

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Ankita Tripathy

Ankita Tripathy loves to write about food and the Hallyu Wave in particular. During her free time, she enjoys looking at the sky or reading books while sipping a cup of hot coffee. Her favourite niches are food, music, lifestyle, travel, and Korean Pop music and drama.

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