Contactless cards appear to be having a moment in the U.S. Some second-generation chip cards (now contactless, too) are arriving in mailboxes, and contactless cards will soon speed the purchase of subway and bus tickets in New York City.
“Capital One has been issuing contactless cards to new Quicksilver and VentureOne customers since mid-April,” says Daniel Mouadeb, vice president of U.S. cards at Capital One. The issuer’s new Savor dining rewards credit card, introduced in October 2017, comes with contactless technology.
Starting in late 2018, New Yorkers will pay their subway fares the way Londoners do now, The New York Times reports, by waving cellphones or contactless credit or debit cards at the turnstiles in the subway or the fareboxes on buses
As the trickle of next-generation chip-and-contactless cards turns into a stream in the U.S., Americans may follow a trail blazed by U.K. and Canadian cardholders who tap and go instead of dipping, swiping and adding a signature at payment terminals.
No more waiting for the chip card payment to process and the annoying buzzer to remind you to remove your card for small-amount purchases. Just tap and go. Easy, right?
Here’s what you need to know about contactless cards as they begin flowing to U.S. cardholders:
What Makes a Card Contactless?
With next-generation chip cards, the embedded chip and antenna let consumers wave their contactless card (or fob or handheld device) over a contactless-enabled point-of-sale terminal. Contactless payments are made in close physical proximity (3 inches or so).
The antenna allows your card’s payment info to be transmitted to the contactless-enabled payments terminal. When you tap your contactless chip card, a cryptographic code that’s unique to the card and to the transaction is created.
The contactless payments process is much faster than with EMV chip cards, says says Jack Jania, senior vice president of strategic alliances at Gemalto, the leading provider of contactless cards.
While an EMV transaction takes roughly 30 seconds, a contactless payment takes about 13 to 15 seconds. Keep in mind that with the EMV payment, you’re waiting on the prompt to remove your card and to jot your signature on the keypad.
“To determine if a merchant is contactless-enabled, just look for the contactless symbol at checkout,” Mouadeb says. Your card, too, will have the waves symbol on the front.
MasterCard also has a contactless locator map. Plug in the address where you live or work to see merchants where your contactless card or device will work at checkout.
Why Subway And Bus Systems Are Going Contactless
Contactless payments are designed for small purchases, such as a coffee, a fill-up at the gas station or a quick trip to the drugstore. Tap-and-go payments work best where people are on the move and EMV chip cards and traditional magnetic stripe cards slow things down.
Jania says contactless cards are perfect for “turnstiles for sporting events or public transit.”
In addition to New York City’s Metropolitan Transportation Authority, which has given a green light to contactless payments, Jania says Boston transportation officials also are looking at adding contactless payments for subway and bus riders.
In London, transit riders just tap their credit cards or mobile wallets at the turnstile. As a result, contactless cards virtually phased out the extra step of buying bus tickets or loading up commuter fare cards.
In fact, in the U.K., contactless cards have toppled cash and coins as the No. 1 payment method, according to July 2017 figures from the British Retail Consortium. Contactless cards, which were introduced in 2007 and were slow to catch on, now account for a third of all card purchases, up from 10 percent as recently as October 2015.
Limits and Card Issuer Policies Vary
Each credit card issuer sets a limit for tap-and-go transactions. Mastercard’s, for example, is $100, says Melanie Gluck, vice president of security solutions at Mastercard.
If a consumer exceeds the card issuer’s limit, he or she keys in a PIN for additional security.
Not all card issuers are rushing to send out contactless cards. In some cases, you have to ask your issuer for contactless cards. Some issuers say there just hasn’t been any demand for them from consumers.
How Some Big Card Issuers Are Handling Contactless Cards
American Express: “We do not provide specific stats regarding the percentage of our cards that are contactless, but I can tell you that today American Express issues contactless cards to U.S. customers upon request,” spokesman Andrew Johnson says. “We continue to monitor adoption and usage to meet card member needs in the U.S.”
Capital One: “Capital One has been issuing contactless cards to new Quicksilver and VentureOne customers since mid-April,” says Daniel Mouadeb, vice president of U.S. cards at Capital One. “Additionally, more and more Venture, VentureOne and Quicksilver customers will receive contactless-enabled cards when their cards are re-issued.”
Discover: “Discover does not issue contactless cards,” says spokeswoman Sarah Grage Silberman. “Our card members are able to include their Discover card in various e-wallets if they would like to use a contactless payments method.”
SunTrust: “SunTrust does not currently issue contactless cards for our debit and credit card portfolios,” says Mark Ford, head of Bankcard for SunTrust. “We do support major mobile wallets (Apple Pay, Sumsung Pay, Android Pay and MasterPass), which are contactless (Near-Field Communication) enabled.
“Our experience has been that the limited number of merchant locations accepting contactless cards has not created strong consumer demand for the product,” he adds. “That said, we do believe that as merchants are upgrading their point-of-sale systems, more availability of contactless payments will be available. This will be especially true where fast payments are required, such as quick-service restaurants, movie theaters, etc., and we will continue to reevaluate the need to add contactless to our card programs.”
Wells Fargo: “Wells Fargo introduced contactless options to our consumer credit card customers in September 2016,” says spokesman Jason Menke.
Currently, Wells Fargo offers the contactless (dual-interface) feature on the following products to existing customers: Wells Fargo Visa Platinum Non-Rewards, Wells Fargo Visa Platinum Rewards, Wells Fargo Visa Platinum Home Rebate, Wells Fargo Visa Platinum Cash Back, Wells Fargo Visa Signature Rewards, Wells Fargo Visa Signature Cash Back, Wells Fargo Visa Signature Home Rebate.
“We continue to evaluate consumer demand and merchant interest in adoption of contactless technology,” Menke says. “At this time, we have not rolled this feature out to all credit card products.”
Why has it taken the U.S. so long to roll out contactless payments?
Contactless cards are ubiquitous in many parts of the world, and if projections hold true, that trickle of contactless cards now flowing in the U.S. may soon turn to a river.
ABI Research, which tracks which tracks transformative technology innovations, projects that U.S. contactless card shipments, which numbered 25.7 million in 2016, will balloon to 229.6 million in 2021. That 2021 estimate, though, has been scaled back by nearly half based on the current appetite for contactless cards among the primary issuers, says Phil Sealy, senior analyst at ABI Research.
Why does it maybe seem as if the U.S. is lagging in the contactless cards race? Jania, of Gemalto, says the U.S. payment infrastructure is “much more complex.”
Canada, for example, has 10 major banks while the U.S. has 14,000 financial institutions.
Canada works with a trio of payment processers, Mastercard, American Express and Interact, while the U.S. has more than 16 payment processers running different payment methods.
“The U.S. is a very different market with many more players,” Gluck says.
Another reason Canada is ahead of the U.S. with contactless cards? With more than 1.2 billion cards in circulation, manufacturing costs played a huge part in the U.S. issuers’ decision to opt for contact-only cards, he says. Canada, on the other hand, skipped the first generation of EMV cards and deployed contactless cards from the outset.
Now the first of the U.S. chip cards are starting to be replaced, and at least some issuers are sending contactless chip cards this time around.
Merchants, too, have to upgrade their point-of-sale terminals to accept both chip and contactless payments.
“It’s a project that takes time for planning, testing, buying new terminals,” Gluck says.
The Strawhecker Group estimates that 52 percent of merchants today accept chip payments, and only 36 percent have contactless-capable terminals. Even then, only 28 percent of POS terminals are activated to accept contactless cards.
The U.S. Contactless Card Timeline
The first contactless card was issued in 2003 in the U.S., Gluck says. Tap-and-go payments were rolled out in trials and pilot projects over the years, then Apple released its smartphone in 2007 and the focus shifted to payments on phones.
By 2014, Apple, Google and Samsung announced their intentions to build mobile wallets. This is also when EMV chip cards began rolling out in the U.S. ahead of the October 2015 EMV migration deadline.
Now issuers are “circling back” to contactless cards, Gluck says.
Contactless payments in the U.S. may get another boost as Fitbit and Garmin roll out new smartwatches that double as a payment device. Load your credit or debit card in your smartwatch wallet, then wave your wrist at the payment terminal to buy your coffee on the way to or from the gym.
“We see more merchants increasingly accepting dual-interface cards – it’s gone up fourfold since 2014,” Gluck says.
In 2014, there were about 200,000 to 250,000 merchants accepting contactless payments. That’s now shot up to about 750,000, she says.
“These are major merchants, like fast-food chains, coffee shops, grocery stores,” she says. “Smaller merchants are working on EMV enabling.”
As more U.S. merchants accept tap-and-go payments, more contactless cards are expected to arrive in mailboxes and wallets. That's what the card issuers and experts say and what ABI Research's projected contactless cards shipments suggest.
Does this mean we are at 3-2-1 contactless with these next-generation chip cards ready for liftoff in the U.S.? Are contactless cards merely having a moment, or will tap-and-go payments become as much a part of our everyday lives as Amazon’s Alexa? It’s too early to tell.
Gemalto’s Jania says contactless cards definitely have advantages. No waiting in line for a EMV chip card reader to process a payment being just one of them.
“The user experience will change over anything consumers have experienced to date,” Jania says. “This will be the base plastic payment technology moving forward.”