Who Benefits from the Surging Interest in Contactless Payments?

In a post-pandemic world, contactless payments may soon become the norm. Amid the ongoing Covid-19 crisis, and in anticipation of a new wave of infections this fall, companies are rethinking how they operate and implementing more solutions designed to minimize contact between customers and associates.

The shift means that business is booming for the companies offering contactless payment technology. Contactless payments are loosely defined as any way of paying for goods or services without physically touching another person or object. Swiping cards in a machine is out, and so is passing cash from one person to another. Instead, consumers are tapping their phones at checkout counters or paying through mobile apps.

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According to a survey by Mastercard, more than half (51%) of Americans are now using some form of contactless payment. Consumers are most likely to use contactless cards for buying essentials at grocery stores and pharmacies, where 50% of consumers say they worry about the cleanliness of signature touchpads.

Consumers in the U.S. have historically been slower to adopt contactless payments, and that’s something that is tied to a lack of merchant adoption, says Rob Fagnani, vice president of strategy at Formation.ai.

“The U.S. market is much more fragmented than other countries, and likewise, it has taken longer for merchants in the U.S. to roll out new technology and update legacy infrastructure,” Fagnani says.

Retail brands that were already invested in mobile payment technology before the crisis are well positioned for the new push toward contactless solutions. Walmart, for example, had already rolled out Walmart Pay, a touch-free payment solution that shoppers can use with the retailer’s mobile app, before Covid-19.

For brands with popular in-app payment systems, like Starbucks, there is a new opportunity to re-engage customers to download and utilize their apps and associated loyalty platforms.

For years, brands have worked to add value to their mobile apps and loyalty programs. Special promotions and discounts to loyalty members have been effective at getting people to sign up, but the ability to access safer forms of payments could be an even more powerful tool.

In addition to encouraging growth in loyalty programs and mobile app downloads, Fagnani says the shift toward contactless payments means brands will have access to more data that they can use to create personalized experiences and strengthen brand loyalty.

“As many consumers are increasingly sensitive to social distancing and touching surfaces in stores, there is an increased focus on the role of contactless payments,” Fagnani says. “Ideally, retailers can facilitate this through their mobile apps to maximize the potential for delivering personalized experiences throughout the customer journey.”

The savviest brand marketers are tying together in-app payments with customer engagement and loyalty to generate real-time insights on how their customers are engaging in and around the purchase flow. With in-app payments, brands are also getting more access to transaction data, including transaction times, dollar values, and specific products. When this data is connected to customer attributes and other contextual data sources, such as click, location, and weather data, brands can better understand each customer’s motivation and provide highly personalized experiences.

“Many brands leverage these insights to engage consumers with personalized recommendations and offers throughout the mobile experience,” Fagnani says.“We have seen some of the savviest brands leverage gamification to encourage product exploration and upsell.”

One example is Starbucks, which has leveraged artificial intelligence and machine learning to build a personalized challenge for each customer. Fagnani says the combination of gamification and personalization has yielded great results for the company.

Not all brands have been able to act on the insights they’re generating through contactless payments, though. For the best results, Fagnani says companies should be incorporating AI-enabled offer platforms that are purpose-built to handle this level of complexity and scale. They should also be incorporating location data to provide more context and insight on when and how to best engage each customer.

“Location data is arguably more important now than ever for analytics professionals in retail due to the pandemic, since pre-Covid customer data is less effective at predicting near-term behavior due to varying personal preferences and local regulations,” Fagnani says. “Location data can simply help understand whether customers are traveling or staying home, which combined with other customer insights, helps marketers make better decisions on when and how to engage each customer.”

Stephanie Miles is a senior editor at Street Fight.