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Copyright 2019 CPI Card Group 1
The Road to ContactlessMapping the journey from charge plates to payment objects - a market ready for change
Copyright 2019 CPI Card Group 2
Although late to the game and despite some formidable challenges, the U.S. payment ecosystem, including
issuers, processors and merchants, is preparing to support contactless as a dominant payment methodology.
Retailer readiness is a key component in the move towards a new way to pay. Fortunately, according to A.T.
Kearney, 70 percent of U.S. retailers already have point-of-sale terminals capable of accepting contactless
payments, and more than 95 percent of new POS terminals shipped are contactless-enabled.1 According to
Visa, 78 of its top 100 merchants by transaction volume already offer tap to pay.2
In this CPI Card Group® (“CPI”) white paper, we will navigate this changing landscape; looking at where
we’ve been and where we are going next. We’ll discuss what is driving the contactless revolution, the
opportunities for consumers, issuers and merchants and considerations and key steps to implementing dual
interface cards (EMV® contact and contactless), an important transitional step on the road to contactless.
Years in the making, the U.S. market is finally ready for contactless payments.
Abstract
Card-based payment methods have evolved
significantly over time - from the introduction of metal
charge plates in the 19th century, to the development
of paper charge cards and, eventually, plastic credit
cards in the mid-20th century and plastic debit cards
in the late 20th century.
Technology progressed quickly from IBM®’s
development of the magnetic stripe in 1960. This
innovation paved the road for the introduction of EMV
chip-and-pin in Europe in 1994, and more recently, EMV
chip technology in the U.S. with the payment brands’
counterfeit fraud liability shift in 2015.
The past decade spearheaded a revolution in payment
methods and form factors, from digital wallets like Apple
Pay®, Samsung Pay and Google Pay™, to contactless
wearables and payment objects.
EMV® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMVCo, LLC.
IBM is a registered trademark of International Business Machines Corp.
Apple Pay is a registered trademark of Apple Inc.
Google Pay is a trademark of Google Inc.
Card-based payment methods in the rearview mirror – where we’ve been.
Copyright 2019 CPI Card Group 3
Outside the U.S., more than 40 percent of in-store
Visa transactions occur with a tap,3 with Europe and
Canada leading the way. For instance, contactless
payments were introduced in the United Kingdom in
2007. That head start has driven public acceptance,
and as of June 2017, a record 34 percent of UK card
payments were conducted via contactless.4 Two-
thirds of Britons have used a contactless card to make
at least one payment.5 Younger generations eagerly
embrace the contactless revolution; 76 percent of UK
millennials made a purchase with their contactless
card in 2017, up eleven percentage points from 2016.6
Other countries are seeing similar results. In Canada,
nearly 70 percent of transactions under $50 occur
with a tap.7 Four out of five merchant terminals in
Costa Rica are contactless-enabled.8
The U.S. has trailed in the contactless payment
trend, with an estimated 3 percent of cards having
contactless capabilities, compared with 64 percent
in the UK and 96 percent in South Korea.9 However,
U.S. issuers are catching on, and Visa expects more
than 100 million Visa contactless cards to be issued in
the U.S. by the end of 2019.10
Many merchants are poised to accept contactless
payments as well, having converted to EMV-enabled
point-of-sale terminals, which are set up to accept
contactless payments using the RF field generated by
the terminal.
The U.S. shifts into second gear - frictionless payments
70%95%
of U.S. retailers already have point-of-sale terminals
capable of accepting contactless payments, and
more than
of new POS terminals shipped
are contactless-enabled
72% of respondents liked the
idea of tapping their cardslike the idea of tapping
an “object” to pay
65%
Visa expects more than 100 millionVisa contactless cards to be issued in the
U.S. by the end of 2019
Sources: Why US Banks Should Make Contactless Cards an Immediate Priority, A.T. Kearney, p. 7. © 2018, A.T. Kearny, Inc. All rights reserved. https://info.atkearney.com/24/2185/uploads/why-us-banks-should-make-contactless-cards-an-immediate-priority.pdf?intIa ContactId=8590813391&intExternalSystemId=1&strExternalSystemType=Interaction+5.6
“Contactless Payments: Global Highlights,” infographic, Visa. ©2019 Visa. All rights reserved. https://usa.visa.com/dam/VCOM/global/pay-with-visa/documents/vsa215-02-contactless.pdf
CPI Card Group. “Consumer Insights Study,” conducted by an independent research firm, Schor Insights and Strategy, among 529 debit and credit card users between 18 and 65 years of age. November 1-2, 2018.
Copyright 2019 CPI Card Group 4
Several major trends are driving the adoption of contactless payments:
1. Changing consumer behaviors: The ubiquity of the “on the go” lifestyle, particularly among younger
consumers, is changing how people prefer to pay. CPI Card Group finds that 21 percent of millennials
prefer to use a mobile app like Venmo®, Zelle® or Apple Pay over other forms of payment.11 Companies
are accommodating this generation’s preferences by offering ticketless concerts and events, enabling
greater speed and convenience. Attendees don’t need to carry wallets or separate forms of payment
beyond a preloaded wristband. Juniper predicts one in four tickets issued will be contactless by 2023.12
Tapping is appealing across all generations. CPI found that 72 percent of respondents liked the idea of
tapping their cards, and 65 percent liked the idea of tapping an “object” to pay.13
2. Fast casual restaurants embrace mobile apps: The fast-casual restaurant sector is one area driving the
mobile and contactless payment revolution, primarily as a way to speed up the payment process and increase
table turnover rates. Tap-and-go was thought to have limited application at sit-down service restaurants, as
customers resist handing their smartphones to their server. Fast-casual chains like Applebee’s® and Buffalo
Wild Wings® have seen success with tableside contactless payment terminals. Fast-casual chain Applebee’s
installed contactless payment tablets at every table in late 2013, and other restaurants quickly followed suit.14
According to research by Maru/Blue on behalf of TouchBistro®, 18 percent of FSRs (full-service restaurants)
accept all three major digital wallets (Apple Pay, Samsung Pay and Google Pay).15
3. Mass-transit presents a massive opportunity: Transport for London revolutionized the public
transportation payment ecosystem when it introduced a system-wide contactless platform in
December 2012. As of April 2018, the system facilitates approximately 17 million journeys a week
across London. Roughly half of all Tube and rail pay-as-you-go journeys, and around 45 percent of all
tram and bus pay-as-you-go journeys, are made using contactless payment cards or mobile devices.16
In the U.S., the Chicago Transit Authority introduced its own Ventra® contactless payment system in 2013.
The system accommodates multiple payment options, including a proprietary contactless card, paper
contactless-enabled one-time use tickets, and a mobile app.17 The CTA serves 1.6 million rides on an average
weekday.18
What is driving the contactless revolution?
Copyright 2019 CPI Card Group 5
Contactless offers issuers numerous benefits
• Contactless transactions are fast: Merchants and issuers benefit from faster transaction speed during
peak periods, resulting in higher transaction volumes. EMV contact transactions can take up to 30
seconds, whereas a contactless card transaction can be completed in just 13 to 15 seconds.19 Customers
who would otherwise rummage through their wallet for exact change can wave their dual interface
card, payment object or mobile device over a reader, and be on their way. Merchants also benefit from
incremental spend, as their customers are not limited to cash on hand. The enhanced convenience factor
of contactless cards has proven to be effective in converting cash to card-based payments.20
• Cardholders are eager to try new formats: Today’s cardholders are curious about trying new contactless
payment methods and form factors. For instance, according to a CPI research study, cardholders are
very interested in using payment object technology at music or sports venues: 81 percent like the idea
of using a band or fob to house their tickets, and 81 percent also like the idea of using such objects to
make onsite purchases at the venue.21
Contactless payments offer cardholders, issuers, and merchants a range
of benefits (Figure 1).
AN ISSUER’S GUIDE TO CONTACTLESS PAYMENTS INTHE U.S.
WHAT ARE CONTACTLESS PAYMENTS?
ESAERCNI NOILLIB 03$ In value of contactless
transactions in 2015
$2 BILLION PER WEEK Spent using contactless
233% INCREASEIn contactless spending
value in 2015
BENEFITS SEEN IN OTHER COUNTRIES
Contactless payments are secure payment transactions that don’t require physical contact between the payment device, such as a dual-interface EMV chip card, NFC-enabled mobile phone or wearable, and the acceptance device.
Global Interoperability
BENEFITSOF CONTACTLESS
ISSUANCE
Improved Portfolio
Utilization
Faster & More Convenient
Transactions
SOURCES:
contactless-payments-take-off-in-canada
http://www.smh.com.au/business/retail/110bn-australias-contactless-boom-20160805-gqmg7j.html
http://www.smartpaymentassociation.com/images/news/16-
New Opportunities
Complementary Strategy to Mobile
Payments
Top-Of-Wallet Status
ImprovedDual-interface Card
Economics
Straightforward Dual-interface
Deployment
Enhanced Security
securetechalliance.org
Source: https://www.emv-connection.com/downloads/2016/06/SCA-Issuer-Contactless-Infographic-FINAL-Jan-2017.pdf Reprinted with permission of securetechalliance.org
• Rise to top-of-wallet status:
The greater convenience of
contactless cards and payments
benefits issuers through increased
cardholder loyalty, lower attrition
rates and enhanced top-of-wallet
status.22 Top of wallet status,
higher transaction volumes and
average spend help to minimize
opportunity costs associated with
customer attrition and lost wallet
share.23
The time has come for issuers to
consider offering contactless to
their existing cardholder base.
Figure 1
Copyright 2019 CPI Card Group 6
First, U.S. merchant terminals aren’t yet fully upgraded to accept contactless transactions. Although 60-
70 percent are already equipped with NFC (near field communication) capabilities, in many cases the
functionality has not been activated.
U.S. issuers and processors must work together to offer contactless options to their cardholders. The first
mile is the most critical to ensuring the success of a new contactless program. Issuers should establish clear
goals and parameters, and then vet their processing partners to determine their preparedness.
CPI recommends that issuers ask their processor a few questions before getting started, such as which
brands and card types will be supported, and their ability to support dual-interface, the latest cryptograms
and magnetic stripe.
Once the issuer is comfortable with its processor’s capabilities, the project can begin. But it’s important
to follow a project checklist to ensure all critical steps are followed, including the proper and correct use of
profiles, RSA certificates, letters of delegation and verification. Once the program formalities have been
settled, test keys can be provided for the new cards with EMV chip and antenna, and production keys
obtained.
Implementing a contactless card program is complex and requires a significant amount of coordination
between the issuing financial institution and its processing partner.
Considerations for a contactless program
Implementing a
contactless card
program is complex
and requires a
significant amount
of coordination
between the issuing
financial institution
and its processing
partner.
Copyright 2019 CPI Card Group 7
Conclusions
The road to contactless payments has been
long, but consumer expectations and innovative
technology make this one of the most exciting
options available to cardholders, merchants and
issuers today.
A convenient option issuers can introduce to
cardholders is dual interface cards, combining
EMV chip and contactless antenna for insert and
tap or wave capability within a single card. CPI
offers dual interface cards for credit and debit
programs and can add applications to control
automatic fare collection and access, as well as
applications to track loyalty and gaming points
for lottery applications.
CPI can also provide payment object technology,
allowing issuers to turn everyday objects into
wearable or non-wearable contactless payment
devices. This versatility allows issuers to offer
open- or closed-loop payment capability in a
variety of form factors, including wristbands, key
fobs, drink containers, hats, and more.
With the benefits of speed and convenience,
contactless offers a ‘must have’ value proposition
to consumers and issuers. The contactless trend
is here and it’s a prime time for issuers to support
the transition by offering dual interface cards.
.
CPI Card Group® is a payment technology company and leading provider of credit, debit and prepaid solutions
delivered physically, digitally and on-demand. CPI helps our customers foster connections and build their brands
through innovative and reliable solutions, including financial payment cards, personalization and fulfillment, and
Software-as-a-Service (SaaS) instant issuance. CPI has more than 20 years of experience in the payments market
and is a trusted partner to financial institutions and payments services providers. Serving customers from locations
throughout the United States, CPI has a large network of high security facilities, each of which is registered as PCI
compliant by one or more of the payment brands: Visa, Mastercard®, American Express and Discover®. Learn more
at www.cpicardgroup.com.
About CPI Card Group
To read more about CPI’s related products and services visit https://www.cpicardgroup.com/elements/emv-
cards/emv-chips/
www.cpicardgroup.comU.S. 1-800-446-5036
Copyright 2019 CPI Card Group
Sources
1 Why US Banks Should Make Contactless Cards an Immediate Priority, A.T. Kearney, p. 7. © 2018, A.T. Kearny, Inc. All rights reserved. https://info.atkearney.com/24/2185/uploads/why-us-banks-should-make-contactless-cards-an-immediate-priority.pdf?intIa ContactId=8590813391&intExternalSystemId=1&strExternalSystemType=Interaction+5.6
2 “Contactless Payments: Global Highlights,” infographic, Visa. ©2019 Visa. https://usa.visa.com/dam/VCOM/global/pay-with-visa/documents/vsa215-02-contactless.pdf
3 Ibid.4 “The contactless revolution ten years on: two-thirds of Brits now tap to pay,” press release, Visa Europe, September 1, 2017.
https://www.visa.co.uk/about-visa/newsroom/press-releases.2130476.html5 Ibid.6 Ibid.7 “Contactless Payments: Global Highlights,” infographic, Visa. ©2019 Visa. All rights reserved.
https://usa.visa.com/dam/VCOM/global/pay-with-visa/documents/vsa215-02-contactless.pdf8 Ibid.9 Why US Banks Should Make Contactless Cards an Immediate Priority, A.T. Kearney, p. 3. © 2018, Figure 1, A.T. Kearny, Inc. All rights reserved.
https://info.atkearney.com/24/2185/uploads/why-us-banks-should-make-contactless-cards-an-immediate-priority.pdf?intIa ContactId=8590813391&intExternalSystemId=1&strExternalSystemType=Interaction+5.6
10 Visa. Q4 2018 Earnings Call, October 24, 2018, from Visa investor relations website, https://investor.visa.com/events-calendar/Event-Details/2018/Q4-2018-Visa-Inc-Earnings-Conference-Call/default.aspx, accessed September 2, 2019.
11 CPI Card Group. “Consumer Insights Study,” conducted by an independent research firm, Schor Insights and Strategy, among 529 debit and credit card users between 18 and 65 years of age. November 1-2, 2018.
12 “Juniper Research: Contactless Ticketing Users to Reach 468 Million by 2023, as Consumers Embrace Frictionless Ticketing,” press release, February 25, 2019. https://www.juniperresearch.com/press/press-releases/contactless-ticketing-users-reach-468-million-2023
13 CPI Card Group. “Consumer Insights Study,” conducted by an independent research firm, Schor Insights and Strategy, among 529 debit and credit card users between 18 and 65 years of age. November 1-2, 2018.
14 “Applebee’s to put 100,000 NFC tablets on dining tables,” by Rian Boden, NFC World, December 4, 2013. https://www.nfcworld.com/2013/12/04/327186/applebees-put-100000-nfc-tablets-dining-tables/
15 The State of Full Service Restaurants 2019, TouchBistro, p. 11. https://restaurantsuccess.touchbistro.com/restaurant-guides/state-of-full-service-restaurants-in-2019-ungated
16 “Half of all Tube and rail pay as you go journeys across London using contactless,” Transport for London, April 24, 2018. https://tfl.gov.uk/info-for/media/press-releases/2018/april/half-of-all-tube-and-rail-pay-as-you-go-journeys-across-london-using-contactless
17 “From transit to transactions, Ventra® does it all,” Ventra. https://www.ventrachicago.com/howitworks/18 “Facts at a Glance,” Chicago Transit Authority, Fall 2017. https://www.transitchicago.com/facts/19 “Tap and Pay Around the World, Rising Adoption of Contactless Cards,” Nimdzi, 2019.
https://www.nimdzi.com/tap-and-pay-with-contactless-cards/20 “Contactless payments are a fast, easy and secure way to pay,” Visa. 2019 Visa. All rights reserved.
https://usa.visa.com/partner-with-us/payment-technology/contactless-payments/contactless-for-issuers.html21 CPI Card Group. “Consumer Insights Study,” conducted by an independent research firm, Schor Insights and Strategy, among 529 debit
and credit card users between 18 and 65 years of age. November 1-2, 2018.22 “Contactless payments are a fast, easy and secure way to pay,” Visa. ©2019 Visa. All rights reserved.
https://usa.visa.com/partner-with-us/payment-technology/contactless-payments/contactless-for-issuers.html23 “Just Tap & Go®,” Mastercard®, accessed from Web, May 6, 2019.
https://www.mastercard.us/en-us/issuers/products-and-solutions/grow-manage-your-business/payment-innovations/contactless.html
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