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Contactless payments gain footing in COVID-19 world

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The same day Beautiful Fight Woodworking LLC opened its new retail shop last month, customers could make contactless payments.

It’s a service the business owners felt was necessary for the current times, particularly amid the coronavirus pandemic. At the 301 W. Commercial St. shop, co-owner Brittany Dyer said she’s observed numerous customers use the technology. Some make purchases with their cellphone, while others tap to pay with their credit card hovering over the point-of-sale terminal.

“It’s not a forced option where you have to do contactless payment, but it’s definitely an option we wanted to offer to people to make them feel a bit more comfortable if they’re feeling uneasy at this time,” Dyer said.

As the COVID-19 pandemic continues, payments without physically swiping a card or handing it or cash to a clerk are becoming more sought after and accepted to make purchases in brick-and-mortar businesses.

Usage of contactless payments in the U.S. has grown 150% since March 2019, according to April 2020 data from Visa. However, industry experts believe extensive usage won’t happen anytime soon.

Change in climate
Even before the coronavirus crisis, banks and credit unions were making investments in contactless payment technology.

BluCurrent Credit Union saw the change in the payment climate last year, said Tim Sperr, vice president of member services. The credit union began testing its debit, credit and reloadable cards for mobile wallet technology in March 2019. Declining to disclose the investment sum, which includes transaction fees for card encryptions, Sperr said the BluCurrent-branded cards can be loaded onto Apple Pay, Google Pay and Samsung Pay mobile wallet apps. Transactions are made through the apps and card numbers aren’t transmitted with payments.

Sperr said contactless payment options used to be all about convenience.

“The meaning of what contactless is today is around safety, based on the COVID conversation, whereas previously it was preferential,” he said.

“This is going to continue to grow more and more for individuals.”

The mobile wallet option is catching on quickly with BluCurrent membership, Sperr said. He estimates up to 15%, or 3,400 of the credit union’s roughly 22,700 members, are using the technology.

“It’s a great product for our membership that they are definitely utilizing far above our expectations last March,” said Lynn Nottingham, member support manager.

BluCurrent spokesperson Jacqueline Post said the credit union only began marketing the mobile wallet in the past four months as the COVID-19 pandemic spread.

“It was really to our benefit in a lot of senses to push adoption,” she said. “We want to be top of wallet. For every transaction a member utilizes our card, we’re earning income.”

Banks and credit unions collect a portion of the processing fee paid by a merchant, typically 1%-3%, according to Investopedia.com.

Beautiful Fight Woodworking’s Dyer said her business pays 3% per transaction in credit card processing fees – contactless or not.

“We don’t have to pay any additional fees for that service,” she said.

BluCurrent is one of many Springfield-area banks and credit unions utilizing mobile wallet options. Others include Arvest Bank, Multipli Credit Union and Great Southern Bancorp Inc. (Nasdaq: GSBC), according to company websites.

Great Southern Bank has offered the technology for about a year, said Doug Marrs, vice president of operations. The bank’s branded card can be registered with Apple Pay, Google Pay and Samsung Pay.

“There was not a lot of capital outlay,” he said, declining to estimate investment costs.

Marrs said although the mobile wallet is slowly growing in popularity, it still makes up less than 1% of the bank’s total card transaction volume.

“Those customers are passionate and a lot of them really like it,” he said, adding the bank hasn’t yet marketed the product. “But there’s not enough (transactions) out there yet to materially change the card dynamics at this point.”

Consumers at the gas pump also have a new contactless payment option.

West Des Moines, Iowa-based Kum & Go LC launched a contactless fuel pay platform in May through its existing mobile phone app. The company’s reward card members can use the app to avoid touching the fueling station keypad by activating the pump through their smartphone.

The company currently operates over 45 stores in the Springfield area, said spokesperson Ariel Rubin. He declined to disclose the company’s investment in the technology but said its development started in late 2019.

Gradual change
While the pandemic appears to be creating a rise in contactless payment interest, Americans are a long way from reaching widespread usage.

A 2019 report from San Francisco-based advisory firm Javelin Strategy & Research Inc. found 39% of credit and debit cardholders own at least one contactless payment card.

Prior to the pandemic, cash was still often used as a payment option in the U.S., with consumers conducting nearly 50 billion transactions a year – roughly 26% of all consumer payments, according to a 2018 study by Chicago-based global management consulting firm Kearney. Debit cards were the most frequently used, at 28%.

A national coin shortage also is impacting cash transactions. Federal officials cite the economic slowdown caused by the pandemic as a primary cause.

Still, Marrs said he has no doubt the tide is gradually turning more toward contactless payments.

“We’re only kidding ourselves if we don’t believe that digital wallets won’t continue to grow as far as market share,” he said.

At Beautiful Fight Woodworking, Dyer said contactless payments are there to stay.

“It’s so convenient for a lot of people and especially with it not costing us anything extra, it honestly makes so much sense to offer that,” she said. “During this time with so much uncertainty, we’re just making sure to be as safe as possible. It’s something that we’ll continue to offer.”

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