Payments

Businesses ramp up touchless payments during COVID-19 pandemic

The usage of contactless card and mobile payments has risen exponentially since March

While some businesses were reluctant to adopt touchless payments to avoid higher costs and software integration issues, the coronavirus pandemic shifted their concerns rapidly.

A survey conducted by the National Retail Federation, a Washington, D.C.-based retail trade group, reported that 67% of retailers who accept touchless payments had been concerned that they would face an increase in transaction costs and more cybersecurity and data privacy risks.

As businesses reopened after the initial shutdown, wary consumers were concerned about touching surfaces such as credit card payment readers that required a PIN or entering a signature on a touchpad screen. The survey revealed that 67% of retailers accept either contactless cards that can be waived past a card reader or tapped on the reader, up from 40% last year and 56% take digital wallet payments from mobile phones now, up from 44%. Retailers are also allowing customers to pay online or over the phone. Touchless transactions rose by 69% since January, the survey showed.  

Some consumers also switched over to using contactless payments for the first time – 19% surveyed by Forrester Consumer Technographics said they made a digital payment at a retailer in May. Out of these customers, 62% used ApplePay, Samsung Pay or another mobile payment app while 56% used a contactless card. The satisfaction levels were high – 67% said they were content with the experience while 57% would continue using contactless payment options after cases of the pandemic declines.

The number of all smartphone transactions rose by 180% from March 1 to June 1, said Clay Wilkes, CEO of Galileo, a Salt Lake City-based payments platform provider. Galileo also saw a 25% increase in card not present transactions during the same period, which are payments made online or in an app such as for product delivery.

Both customers and employees at businesses want to minimize the amount of physical contact when payments are being made.

“We’re moving down a path with the pandemic where we will have long-lasting social change and one of them will be contactless payments,” he told FinLedger.

The number of merchants who will switch to contactless digital payments will continue to rise even in 2021 when the impact of the pandemic could be lessened, Wilkes said.

Many small businesses only offered one or two payment methods such as a credit card reader for in-person purchases or e-commerce payments but lacked other capabilities such as monthly payments. As some companies cut costs and staff such as billing managers and receptionists, integrating and automating all the different payment methods to ensure customers pay on time is a priority now, said David Sharp, president of PaySimple, a Denver-based payments management solution provider for service-based businesses.

The number of new PaySimple client activations rose by 40% from March to August since the company’s software ties all the various components together and allows small businesses such as medical offices and day care centers to be more efficient. While some businesses offered credit card, debit card, ACH transfers and online payments, others had gaps and did not accept mobile payments or lacked software for recurring billing.

Some businesses are now building online stores and accepting mobile payments.

“The customers are looking for our business management software since it is all under one umbrella,” Sharp said. “When we tie all payment aspects together – mobile, digital invoicing, recurring invoicing, e-commerce/online and in person, the data also creates insights on customers’ buying activity.”

These businesses are now shifting their focus on attracting new clients and marketing to existing ones to get more recurring revenue, he said. The company’s data shows the demographics and payment history of the customers of a small business and helps them have more predictability in cash flow. This strategy allows these smaller businesses to make investments or decisions to add more employees in real time.

 “Our software helps them sustain their business and gives them insight to grow,” Sharp said. “It has proven incredibly valuable during the pandemic.” 

Other industries such as healthcare and medical devices were also forced to switch to touchless payments to cope with operational efficiency and cash management as demand for their services and products were unprecedented, said Jeremy Almond, CEO of Paystand, a  Scotts Valley, California-based business  payments provider.  

“Meeting that surge in demand while also dealing with remote operations and health concerns made digital infrastructure the only option,” he said.

These industries had relied heavily on traditional payments and had over 50% of all payments made via paper checks or costly card/ACH options. But they needed to keep paying employees and meet new health guidelines and utilizing digital payments met that goal. One of their customers is eMDs, an Austin, Texas-based electronic health records and telehealth provider, who needed to adopt digital payments for three separate business units so “they could scale to meet the exploding demand as almost all patient visits nationwide went virtual,” Almond said. 

Another Paystand customer is Ventec Life Systems, the Bothwell, Washington company General Motors partnered with to build ventilators.

“Both of these examples highlight companies whose operational procedures – payment acceptance, delays in cash recognition and deployment of working capital were manual, paper-based, and time-consuming,” he said. 

While the U.S. has had NFC tap-n-pay since the early 2000s, adoption by consumers has waxed and waned until the pandemic made it a priority, said Brian DuCharme, vice president of product management at Transaction Network Services, a Reston, Virginia-based data communications provider.

Mastercard reported that 51% of Americans are now using some form of NFC contactless payment from smartphones to make in-person purchases during the pandemic, he said. 

“At TNS we have seen an acceleration in contactless payments within our global customer base as consumers increasingly see this as a safer, easier way to pay, supported further by several countries raising their contactless spend limit,” he said. “Retailers of all sizes need to be able to offer this option at their checkouts. Retailers who respond with options now may benefit from strengthened loyalty for offering consumer choice that promotes safety for their customer.”

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