Demand for touchless technologies in 2020 has U.S. businesses rushing to adapt. Could contactless payments be part of the “new normal” when the pandemic cools down?
While contactless payments have been widely adopted in many countries around the world, the U.S. has historically lagged behind. Australia, for example, reached a contactless payment “saturation point” in 2017 when it became the preferred method for over 90% of purchases. Contactless payments also began accounting for a majority of transactions in multiple countries in Europe in recent years.
Meanwhile, in 2018, A.T. Kearney reported that only 0.18% of U.S. point-of-sale transactions were contactless.
However, COVID is eroding away at consumer resistance to contactless payments in the U.S. Eighty-two percent of consumers agree that it’s a cleaner way to pay, and a National Retail Federation survey found that 69% of retailers have seen an increase in touchless payments since January. Of U.S. consumers using touchless payments by July 2020, 50% made their first mobile wallet and contactless payment purchases during the pandemic’s early stages, and 74% plan to continue using them post-COVID.
Contactless payments—including those that use RFID chips, NFC readers, and QR codes—offer a secure way to execute transactions without having to dip or swipe a card, write a check, or handle cash. They’re convenient and hygienic, but adoption in the U.S. has been stubbornly slow.
Consumer habits offer some explanation, but in our experience, it’s merchants who play the biggest role in adoption. Yet for years, many have been hesitant to invest in updating payment systems. It’s expensive, there’s not much customer demand, and there’s a real fear merchants may be investing in technology that’ll be leapfrogged by something better in the near future.
Yet, merchants arguably have the most to gain from adopting contactless payments.
In addition to making transactions cleaner, touchless transactions are completed faster than other forms of payment—keeping lines moving and customers happy. They’re also backed by fraud protection and cost the same to process as credit cards.
Merchants can also use contactless payment technology to boost customer loyalty programs. Many are already using the opportunity to improve the customer experience. Merchants can collect customers’ contact information to send digital receipts and ask for feedback, and even pair the technology with mobile apps to share custom discounts or promotions.
In our work with Visa, Kunai even made it possible for customers to engage with products through their mobile devices while shopping at brick-and-mortar stores. Customers were able to receive personalized in-store offers based on their shopping behaviors and easily scan and check out with their smartphones.
Our work taught us that contactless payments give stores an aura of sophistication and style. In a competitive environment, each of these small improvements leads to a much higher rise in consumer satisfaction than you would expect for what, on the surface, feels like a marginal change to the experience.
When merchants take the lead on contactless payments, adoption from touch-averse consumers will follow.
The conversation about contactless payments tends to focus on consumers, financial service providers, and occasionally merchants. In reality, however, this is just one part of a much larger conversation happening about a future cashless society. How we think about money has already shifted away from paper and coins.
Most people don’t think about how much cash they have in their wallet; they think about how much money is in their account. More and more are trying to wrap their heads around Bitcoin and starting to invest in cryptocurrencies. Even if the average American doesn’t have a deep understanding of virtual currency, they do understand that it is somewhere on the horizon. (Just look at conversations about central digital bank currency and cryptocurrency, for example.)
While financial service providers focus on the immediate need for digital transformation, the larger conversation is about a full digital transformation of the world. When vendors embrace digital currency, they’re a part of that future.
Transitioning to a cashless society certainly has its hurdles, including bankless consumers who still rely on cash to make purchases. But as fintech solutions rise up to bridge this gap, transitioning is just a matter of time. Contactless payments are one part of this journey. They save time, especially for shoppers visiting multiple stores in a day, and are perceived as safer as we weather the current health crisis.
At this point, contactless payments have been in use for over six months, and most people using the technology plan to continue doing so. As a result, contactless may become the new payment habit that replaces card swiping and dipping, changing how the U.S. conducts transactions forever.
Sandeep: Tell me a bit about the early part of your career.
Tom: I spent a decade helping to build start-ups focused on application and database software. This was where I learned how to sell and do business development. I was fortunate to be part of one company going public and another being sold to IBM.
Sandeep: What is something you learned during this time that helped you with consulting?
Tom: I began to appreciate how different customers achieved varying levels of success with the same foundational technology. This made me understand just how critical getting your team and process right can be.
Sandeep: This is something I only came to appreciate years into consulting, especially after the sale of my first consultancy to Capital One.I saw teams in different parts of the company trying to solve challenges like real-time messaging. Same corporate culture, same technology, same internal support mechanisms. Night and day outcomes.
Tom: We saw a lot of the same thing after selling our practice to EMC (sold to Dell in 2015). This is probably the thing I'm most proud of when it comes to the teams I've helped to build: the ability to perform well in a variety of contexts, sometimes in ways that inspires the client team to up their game as well.
Sandeep: Yes. It's particularly cool to see your team succeed in individual ways after an acquisition...consulting skills definitely translate into the corporate environment.
Tom: Totally. We have people who've stayed on at Dell and risen up the ranks, while others took the opportunity to become successful executives at other Fortune 100 companies....or to start their own agencies and startups.
Sandeep: We've both been around a while. My first consulting project was a Y2K thing for Cisco back in 1998. You've been around a little longer than that :). How do you think consulting has changed most during the past five years?
Tom: I think because there is so much infrastructure available now, consulting has become more delivery and outcome-oriented. A better blend of strategic and tactical. Public Cloud has also enabled velocity to increase at a pace unfathomable 5 years ago.
Sandeep: What has stayed the same?
Tom: It's still mostly about people. People who thrive on change and are focused on their personal and professional development. I love that this has not and will not change...it's what I love about consulting.
Sandeep: I know you're adjusting your work style to COVID. You're still a dude who clearly prefers to drive an hour for a socially-distanced hike or outdoor meeting over Zoom any day of the week :) But personal styles aside, what is specifically compelling about a remote agency during the era of COVID?
Tom: Kunai has been remote for years, which gives them an inherent advantage. There is something about the communication and management styles that just works in a way that other organizations are still figuring out.
Sandeep: Yeah, I think what a lot of people fail to realize is that remote work isn't just office work over Zoom. it's an entirely new paradigm. There needs to be an understanding for asynchronous efficiency...and this just takes time and effort to develop. How do you approach remote work and family? What are you learning about separating work and personal time?
Tom: No matter what the form of interaction, Focus. Be present. Quality over quantity. The best weeks are the weeks where I proactively schedule work and personal time. Neil (Kunai's Head of Delivery) shared a great quote with me "With discipline comes freedom." When I am proactively addressing the majority of my professional and personal commitments, I find I earn a little flexibility. A little freedom.
Sandeep: Tell us about a business hero of yours that I may not have heard of before.
Tom: Paul O'Neill is someone you may not know. His work in both the public and the private sector created a profound impact
Sandeep: We are both over forty years old :). How have you learned how to work smarter during the past decade or so? What do you wish you knew about consulting when you were 25 that you know now?
Tom: Consultants want to make lasting change. Lasting change is often not the act of a single person. Today I work much harder bringing others along on the journey.
Sandeep: Last question. What are you doing here? :) Why join a small consulting company this late in your career when you could have a cushy job somewhere else?
Tom: I love a good challenge personally and professionally. When I turned 40, I decided I would run a 10K every Thanksgiving weekend and try to have my finishing time be less than my age. With the exception of one year where I did not run due to a health issue, I have met the goal. I also recently completed the Leadville 100 Mountain Bike race. So, I guess I'm here because I'm a glutton for punishment :) Jokes aside, our customers have a job to do and I intend to put Kunai in a position to execute flawlessly on their behalf. I love committing jointly to audacious goals for our customers and our business.
When I’m not building fintech solutions at Kunai, I’m often engaged in other types of creative problem solving in my free time. One great example of this is my years-long endeavor to create a simple computerized clone of an old Hasbro board game.
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