‘Once consumers have the contactless payment experience, they’re never going to choose the option to insert and wait, and have a conversation with a clerk. They’re always going to choose speed and convenience.’
Contactless payments are coming into their own in the U.S. this year. With a fast and elegant consumer experience, it comes as no surprise.
Dan Sanford is Head of North America Debit and Prepaid and Global Head of Contactless Payments at Visa. He has been recently invited by Electronic Transactions Associations (ETA) to chat with Amy Zirkle. They spoke about the current situation with contactless payments, their meaning for customers and merchants, and further plans of payments technology companies like Visa.
Dan Sanford has been at Visa for 10 years. He started in a bill payment sales team. After a few years of doing strategy and product development work, he moved into Visa’s Global debit product team. It was the time, when the Durbin Amendment came into effect. For Visa, it was a big event to manage through and a lot of things to deal with. But the most important announcement was a liability shift for the U.S. and moving to EMV technology. And now it’s the contactless payment era.
What’s compelling in pushing the industry in the marketplace towards contactless?
If you go back to EMV, it introduced the concept of dynamic data into the ecosystem. Now, when you insert your card, there is the dynamic value that’s created on every single transaction. That’s the power of EMV that brings down counterfeit fraud. Unfortunately, from a consumer experience, it feels slower. So, what contactless does now is it gives you the same security but over a much faster form factor.
Now, instead of inserting your card and waiting for the transaction to complete, you can just tap to pay and be done with your transaction. So the experience is just much faster. Additionally, it introduces all these new innovative form factors with mobile, with paying with a wearable, new use cases such as transit that wouldn’t have been able to work in the EMV-world.
Speaking about the interface, there are cards that still have the stripe the chip but also have the NFC logo on it. You can use it in a variety of point-of-sale experience. If a merchant still only supports magstripe, it works at chip locations anywhere around the world. And it also works if you want to pay with contactless anywhere around the world. So that card is kind of a Swiss army knife, it works at all 47 million locations around the world, whether you’re swiping, inserting or tapping.
What was the consumer reaction to contactless payments around the globe?
Visa’s specialists went out and looked at the experience in Australia, London and Canada. They found out that the consumers’ response in general was one of those things that we always say the first time we do it. ‘It’s kind of okay, this was faster and stuff’.
But when you actually have habituated and you’re doing it to buy your coffee, buy your bagel, ride a train, buy your groceries, you get to a tipping point like ‘what the heck was I doing before this?’
The experience in a hole is so much better than what we have today with EMV.
Once you can build the consumer’s awareness of contactless payments, the usage just accelerates. It’s kind of like using the hockey stick analogy. That first 10% is where all the work happens, but once you get consumers aware of it, you really see it accelerates and that growth take off in markets all over the world.
What was the experience with public transit in the U.S.?
Visa is live now in four cities. Portland, Chicago, MTA went live at their 16 stations and 500 buses in May. And just a few weeks ago the contactless payments were launched in Miami transit.
MTA estimated that they would see probably six to ten thousand transactions per week. And between May 1st and August, they had over a million transactions. So, it was like eight times more volume than they had expected just because of the experience that transit brings. At the point of sale, the contactless experience is evolutionary, but in transit is revolutionary.
You fly into New York, you get off the plane, and go to buy a ticket. The train’s coming. You’re running, you get to the kiosk, there’s eight people in line in front of you and waiting to buy a paper ticket. You miss the train. That experience is a consumer’s suboptimal, to be nice about it.
Now, all the sudden, you get off a plane, you have your contactless device that you use for everything else that you buy. You can walk up to the turnstile at MTA, you tap to get on and it’s a seamless experience.
And the other thing is the habituation component. There’s really no other use case outside of some coffee fanatics where you’re really purchasing multiple times a day, every day of the week. So now you have people who are going to ride transit in the morning to work and then they tap to get on and then they tap to buy their coffee, they tap to buy their morning breakfast… It really has the effect of habituating contactless payments because that experience is something that you do every day. So, the potential for growth and expansion is significant.
Where does Visa see the next targets besides that success with transit, and what other contactless partners it considers?
One of the big things for Visa right now is really getting more and more cards in market. We know that consumers will gravitate towards that experience based on everything else we see in the world around the world. We’re agnostic to whether or not you pay with a phone or you pay with a card. As long as you’re paying with contactless and you have a great experience at the point of sale. That’s our objective. This isn’t about a black-and-white discussion of phone versus card. It’s both. It gives the consumer the choice of having a great customer experience at the point of sale and we know that will solve a lot of the problems that we introduced with EMV.
Is there some substitutability between mobile and contactless? Are they interchangeable?
It’s existential discussion we’ve had forever. I think it all goes back to consumer preference and I think what we learned over time in the U.S., especially in the in terms of this initiative, it’s really challenging to force everyone down one path.
We needed to give the customer the choice and put a contactless device in every American’s hands. Doing that on mobile, is a lot more difficult than doing it on card, because consumers are habituated to just ‘I get a new car and it comes in the mail. It has contactless on it. I didn’t do anything.’ Now, we still have to do a lot as an industry to educate them on the benefits, get them to use it. We are promoting this heavily with our partners to go drive the usage. But when it comes to getting a cardholder to have a contactless device, the easiest way to get them to have a contactless is to mail them one.
You’re going to have a ton of consumers pick mobile and a ton of consumers pick card. However, in order to migrate, the industry has to be giving them the choice of both.
What are Visa and other payment companies doing to encourage merchants to move down to contactless payments?
Visa has done a lot of work behind the scenes for the last few years working with our partners to get them enabled. Nevertheless, the real focus now has transitioned into making sure that experience is seamless. You still get friction at the point of sale in terms of signage, awareness, clerk training, knowing that you can actually tap to pay at those retailers.
So, a lot of our effort now while the terminal supports the functionality and I could tap to pay it’s making sure that the experience is seamless. When you walk in, you see the symbol that the checkout gives me the option of paying with contactless at the same time with EMV. We’ve done a lot of work with our retailers. And we continue to do a lot of work driving education and awareness at the point of sale partnering with those retailers to make sure that the experience is seamless.
We’re in the midst of a 20-city. We call it ‘street team migration’ where we go out to all these small businesses and we put up signage around ‘tap to pay’. So that you can drive awareness.
The other thing we do obviously is partnering with retailers, driving usage and doing promotions. Because we know we have to get the consumers to tap that first time to become aware of it. In such a way, we can start to habituate that experience.
So, as more and more cards come to market, I think you’ll see more of our partners partnering with retailers. They say ‘if you go and tap to pay at Target or Whole Foods or CVS or Walgreens or Costco, you can get X’. Those are, you know promotion and upgrade of the size of your coffee, things like that.
Right now, we’ve kind of been waiting to get more and more cards to market starting to really promote the use case.