Payments Beginning to Return to ‘normal’ – How will we Deal with the Transaction Process Post-Covid?
Welcome to the first post in our series on touch-free authentication. In this post, Art Stewart, Global Head of Sales and Marketing at IDEX Biometrics, discusses payments beginning to return to ‘normal’ and how to deal with the transactions process post-Covid?’.
Retail sales in the US soared back 18.3% in May and another 8.4% in June reaching pre-COVID levels during July. The picture is similar elsewhere, for example according to the UK’s Office of National Statistics, retail sales are now 3% higher than before the lockdown began. Spending is clearly back to normal, but the ways we spend may have changed forever.
20% of people admit they actually washed cash during the lockdown – either in the sink or with sterile wipes. Some retailers even started to refuse cash. Cash has two lasting disadvantages; we can’t print it at home and we don’t know where it has been. Although that was always true, the lockdown has made more people realize it is an issue. According to Forbes, smartphone payments have increased 41% in the US, now passing $98 billion in value (https://www.forbes.com/sites/shelleykohan/2020/03/01/fueled-by-increased-consumer-comfort-mobile-payments-in-the-uswill-exceed-130-billion-in-2020/).
Smart devices and payment cards eliminate the need for journeys to banks so some have started to redesign their branches to eliminate cashiers. Even before the epidemic, many financial institutions were predicting an almost cashless economy within ten years. Covid-19 has not only accelerated that trend, but also underlined the value of contactless transaction. If Covid-19 remains a threat for years as many predict, there could be little cash circulating by the end of it.
Although retailers were instructed to frequently sterilize their payment keypads, many found this impractical and shoppers noticed. 8% used their debit card to make a touch-free payment for the first time. Another 7% made a touch-free payment using a smartphone for the first time. Combined, that is a large number of people who learned to make contactless payments during lockdown. The slow migration to contactless has accelerated significantly with our new found sensitivities around clean, safe and secure transaction.
Responding to the touch-free payment trend, PayPal launched a new QR code-based payment app (https://www.cnet.com/news/paypal-looks-to-make-it-easier-for-you-to-use-contactless-payments-in-stores/) that allows businesses without a PoS machine to accept payments through a code. This means even farmer’s markets and craft sales can now easily operate cash-free. In tech-loving China where there is less concern about fraud, QR code-based apps like WeChat Pay from TenCent and AliPay from Alibaba are extremely popular. However not everywhere has coverage and smartphones can be cumbersome when making a payment and costly. Now that touch-free payments with a card are replacing greater percentages of cash transactions the user concern shifts to security and safety.
Touch-free payment has been hindered by security concerns: digital accounts can be hacked and anyone can use a stolen card. Consequently, the value of contactless card transactions has been capped too low for typical household shopping expeditions. Without better security, neither the public nor the banks are keen on the risks.
Smartphone security relies on fingerprint sensors and is a globally accepted method of protecting your privacy. Similar sensors are now incorporated into payment cards as well – and without the right finger on the card it will not complete the transaction. This new robust layer of security removes worries and allows transaction limits to be raised or even eliminated. With emerging Biometric Smart Card payment cards, touch free transaction and user security can be achieved without sacrificing convenience. There is no waking up the device, launching the payment app and authenticating … there is just tap and go, holding the card the same way you always do.