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How contactless payments are taking over

TRENDS & ANALYSIS

Hero Contactless Article Hero Contactless Article Placehoder
BY

Elisa Eriksson

When the use of contactless cards began to pick up five years ago, some were wondering if it was just a passing trend or an innovation that would change the industry for good. Today, around half of all card payments in the Nordics are contactless and as the purchase limits for contactless is being raised in country after country, this technology is set to dominate in-store payments in the future.

Visa and Mastercard have played an important role in the growth of contactless payments, and both card schemes have now set a deadline for retailers to make sure that all their payment terminals are able to accept contactless payments by the end of 2020. Together with banks, Visa and Mastercard have also pushed to raise the purchase limits for contactless payments without PIN.

On a Nordic level, banks and card schemes in Denmark raised their limit from 200DKK to 350DKK in 2018, while Finland and Norway will increase their limits on April 12th 2019, from 25€ to 50€ and from 200NOK to 400NOK respectively. In Sweden no timeline has been set for a limit rise, but the change is expected to happen. The new EU directive, PSD2, has also created a new framework for contactless payments. This will allow customers to make single contactless transactions up to 50€, without the use of their PIN. If customers reach a maximum cumulative value of 150€ or make five contactless transactions in a row, then the PIN will be required.

The new limits in the Nordics

CONTACTLESS PAYMENTS

350kr

Denmark: 13th April 2018

50€

Finland: 12th April 2019

400kr

Norway: 12th April 2019

The benefits of an increase

The rising limits is a change that benefits all parties; consumers find contactless payments to be easy and convenient, businesses can provide a faster payment experience and as contactless payments are a very safe way to use a payment card, this is also in the EU’s interest.

With the increased limits, customers won’t just be able to make smaller purchases with contactless, but also fill up the car or top up a travel card by just swiping their card or phone in front of a payment terminal. No more PIN codes or choosing between Debit and Credit after a small dinner at a local restaurant.

Since, contactless payments are so fast and easy to use, they are very popular among consumers. And when the consumers are happy, so are the merchants serving them. Customers will be able to pay larger amounts in seconds, and this will naturally improve the efficiency of businesses. We have previously written about how faster payment methods reduce queueing, which improves customer satisfaction and makes customers more likely to visit the store again.

Bambora has offered contactless functionality in terminals from the start and we have witnessed the popularity of contactless payments grow noticeably. Between 2017 and 2019, Bambora saw the share contactless payments rise by 25 percentage points in the Nordics. The share of contactless payments in Denmark has increased the most and the share in Sweden the least.

Now, the limit rise in Finland and Norway is likely to lead to a further increase in the use of contactless payments there. As an example, Visa concluded that after the limit was raised in the United Kingdom in 2015, from 20£ to 30£, the number of contactless card transactions rose by 161 percent within the next 12 months.

After the limit rise in Denmark in 2018, Bambora also saw a large increase in the share of contactless payments: from 65 percent of all card payments the month before the change to 74 percent of the payments the month after. It is hard to predict exactly what impact the limit rise will have in Finland and Norway but based on Bambora’s data, the share of purchases done with contactless could theoretically increase by around 15 percentage points in both markets.

The future of contactless

The limit rises in the Nordics in April and the 2020 deadline set by the card schemes are getting closer each day. As Bambora has included contactless payments to our in-store solutions from the beginning, our merchants have no need to worry about updating their terminals or acquiring agreements. Quite the opposite, they can excitedly await the change and anticipate the impact it will have on their sales and how it will affect queues during peak hours. We believe the change will increase sales in the long run for SME businesses, as they are able to offer even more customers a fast and simple payment experience.

An interesting trend that could enrich the payment experiences even further is wearables that use contactless technology. Smart watches, payment rings and even tattoos have been out in the field for a while, but now they have gone from the field of niche products and entered the big market. Nayax explains how by 2021 there will be an estimated 500 million wearable technology devices in the market and that 20 percent of them will be enabled to make payments with.

The share of transactions, handled by Bambora, that are contactless in the Nordic countries.