As life gets faster and people get busier, time is your customers’ most valuable commodity. Everyone wants more time to do what they’d rather be doing. And that means ticking off the essentials – like paying for things – as efficiently as possible.
Which is why contactless payments have been such a success story. As with many of life’s tasks, customers want to make purchases quickly and easily, so they can get back to the good stuff.
Tap and go payments are an interesting phenomenon. Rather than being an end in themselves, they’re what make the rest of life possible, whether it’s the fun things – such as eating out or splurging on some new shoes, or the more mundane things – such as putting petrol in the car or fresh food in the fridge.
But while contactless payments may have become indispensable without much fuss or fanfare, there’s no denying they’ve changed the way customers behave.
So what’s the deal with the boom in tap and go and what does it mean for retailers?
The payment customers don’t even think about
Your customer orders their usual latte and you ask politely “Can I tap that”? “Of course,” they say, without a second thought. With so many things on their to-do list, they know that the quicker the payment, the better. And the stats show they’re not alone.
The ubiquity of contactless transactions is undeniable. For instance, Australian bank Westpac recently looked at the payment habits of Visa cardholders, bringing to light the rapid growth of tap and go in Australia over the last few years.
The article highlights that even though contactless payments are already the most popular form of card payment, their use continues to rise. In fact, an extra 67 million contactless payments were made in 2017, taking the total to 325.4 million – an increase of 26%.
It’s a trend that’s not only evident from year to year but over the course of the year, with 24,645,921 contactless transactions in January 2017 increasing to 33,422,181 in December 2017.
90% of card purchases are now contactless
It’s no surprise that consumers globally are shifting away from cash and towards electronic payment methods such as credit and debit cards. A 2016 survey by the Reserve Bank of Australia found that cards are now the most common way we’re paying for things, overtaking cash for the first time. The survey shows that people of all ages, income groups and locations used cash less on average in 2016 than ever before.
And when it comes to cards, the biggest growth is in contactless payments.
According to Westpac, in the last two years, the use of tap and go went up from 81% in January 2016 to 92% in December 2017 as compared to other card transactions (these include chip, magstripe and contact). When time is money, why would customers bother swiping or inserting their card when they can just give it a wave?
Another interesting stat is that a whopping 90.6% of face-to-face transactions made by Westpac Visa cardholders in 2017 were contactless, up from 57.3% in 2016.
The convenient way to buy everything from pizza to pet food
While customers are turning to tap and go in an endless range of scenarios, some types of contactless purchases are more common than others.
Most noticeably, it seems people have the biggest appetite for contactless payments when they’re hungry. Westpac states customers are most likely to tap for fast food, with 98% of all ‘quick service restaurant’ payments being contactless. The next most popular payments are other restaurants at 96%, followed by food and grocery at 93%. Least popular are payments for healthcare, still with 59% of transactions being contactless.
What does this say about people’s buying habits? Obviously time-poor customers are most likely to wave their card when they’re looking for a quick and easy option. So if they can’t wait to pay for their purchase and get on with things – whether it’s coffee, lunch or that new outfit, why not tap and go? Whereas in situations where people aren’t in so much of a hurry or maybe even those that seem more significant – say when paying for healthcare or other services, they may be happier to take their time.
Smaller contactless payments are the most common
Another thing that affects the types of transactions customers are most likely to use tap and go for is the amount they’re paying at the time. With no PIN required for contactless payments under $100, it’s little wonder that smaller purchases are the most popular way to pay on the go.
As the RBA data suggests, the big increase in card use for lower-value payments over the last few years is the direct result of greater contactless payments by customers at the point of sale.
So, who loves paying on the go?
The shift away from cash to electronic payment methods including contactless transactions is being driven by businesses and consumers alike. As cash-only businesses become less common, card-only businesses are on the rise.
Interestingly, Australia leads the way in championing this most convenient of payment methods, with tap and go making up more than a third of all retail transactions.
Other countries are not far behind, with the UK’s contactless payments sitting at around 30% of payments. And while the US has been slower to tap and go until now, this is changing rapidly as card chip technology catches up – with the number of contactless cards being issued expected to jump to a massive 229.6 million in 2021 from just 25.7 million in 2016.4
The stats show that customers’ love of tap and go is widespread, cutting across all generations and demographics. While contactless transactions are a big hit with the younger generations, the RBA nevertheless found that people of all ages are choosing to tap and go more than they did three years ago. This was evidenced by nearly 60% of all survey participants (including those aged 65 and over) making at least one contactless payment that week, up from a third in 2013.
Not to be outdone by the youngsters, consumers aged over 65 have had the biggest growth in contactless payments over the last few years, with the number who’ve made at least one contactless payment more than doubling between 2013 and 2016.
How does tap and go compare to mobile payments?
Similar to contactless payments, mobile payments are also growing in popularity. While Australia is a leader in contactless payments, this seems to be at the expense of mobile payments, which are much more popular in other countries.
According to Roy Morgan, only 6.1% of Australians used Apple Pay, Android Pay, Google Pay or Samsung Pay in the 12 months up to June 2018. Whereas mobile payments are used by about 44% of people in the US and 35% of people in the UK. Topping the list is Indonesia at an incredible 95%, followed by India and China, both at about 86%.
Even where mobile payments are not yet commonplace, it makes sense that mobile trends will follow those in contactless as the technology becomes more available and consumers become more familiar with this option. After all, it’s the same idea, with the added convenience of not even having to reach for your card. And when people often have their mobile phone in hand anyway, why not use it?
Towards tap-and-go saturation point
As Roy Morgan says, the evolution of these new payment methods doesn’t only give consumers a smoother purchasing experience, it also provides businesses with valuable data on what people are buying, and how and where they’re buying it. Taking full advantage of this information is something that will become more crucial to businesses going forward.
Another insight is that by embracing contactless payments so wholeheartedly, customers are also endorsing the security of tap and go, despite not needing to enter a PIN for purchases under $100. As is the case with Westpac, extra reassurance is provided by the fraud detection and other card protection systems put in place by most banks.
In short, the last 5 years has seen an exponential jump in the popularity of contactless payments at the point of sale. It’s a trend that will continue to drive even more convenient ways for your customers to pay for things every day – not just through mobile payments but increasingly inventive means, such as smartwatches and even rings!
No wonder it’s the fashionable way to pay.
About Edward Wills
Marketing and startup writer with a keen emphasis on growth hacking and marketing. Believer in multiple channel growth including social, organic and referral.