How POS Might Evolve to Meet Health Concerns
It’s no secret. Paper money is not just dirty; it is downright filthy. But until COVID-19, only “germaphobes” seemed to care. Now, however, consumers everywhere are concerned about the fact that government currency can carry approximately 100 strains of bacteria (according to this 2017 study) and can host live flu viruses for three − but sometimes up to 17 − days!
Consumers aren’t the only ones, governments care too – in fact the United States Federal Reserve began quarantining physical dollars it repatriated from Asia and Europe before recirculating them into the U.S. economy as a precaution against the transfer of COVID-19. Meanwhile, China ordered local currency notes from specific areas of the country to be disinfected with ultraviolet light and kept in isolation for up to 14 days before being redistributed among the population.
Unfortunately, credit and debit cards fare no better. In a recent study by lendedu, credit and debit cards were dirtier than cash! While this may come as no surprise to many – this type of data on bank notes and payment cards has been in circulation (excuse the pun) for quite a while – it is getting even more attention during the COVID-19 pandemic. For this reason, some significant payment technology changes within the hospitality industry could be a part of our future – specifically a move to contactless payments.
USA Lags World in Contactless Adoption
American businesses and consumers have been very slow to adopt contactless payment technology, especially when compared to other areas of the world where contactless and digital payments are well explored, says Franco Zaro, director of business development at Valid.
For example, Canada has had contactless payments for 20 years, says Alex Barrotti, TouchBistro CEO and founder. It is commonly used in QSRs and over the counter retail shops as well as for parking meters, gas pumps, convenience stores and other outlets that require lower payments.
In fact, outside the U.S., the use of contactless payment technology has a more than 50% penetration, with some countries as high as 90%, adds Rohith Kori, Senior Director of Corporate & Product Strategy at Agilysys.
Why would the United States be so slow to adopt this new technology? As the saying goes: “If it aint broke, don’t fix it.”
Americans saw no need to “fix” a system that was running smoothly.
“America doesn’t have the same urgency as other countries to adopt contactless payments due to its traditional attachment to money transactions,” Zaro explains. “With the system running smoothly, the American market has not been under any urgent need for change.”
And for those businesses that were “first adopters” of the contactless payment technology, there were quite a few problems associated with it, notes Lisa Shipley, partner, Pierce Consulting Partners.
“Fifteen years ago, contactless technology was clumsy and expensive. To enable contactless, businesses had to add an external device to their POS, it often was hanging off the device, even falling off the counters,” Shipley explains. “Businesses didn’t like it, consumers didn’t get it -- it was a dismal failure.”
Eventually, the technology for contactless was added internally to POS hardware, providing businesses with a significant improvement on aesthetics and functionality. But there still weren't enough contactless cards circulating to warrant an upgrade to the hardware by businesses, says William Hernandez, partner, Pierce Consulting Partners. In fact, VISA, Mastercard and other major card issuers (Chase, Bank of America, Citi, etc.) have only just recently begun to really roll out contactless-enabled payment cards to most U.S. consumers in earnest.
6 QUESTIONS TO ANSWER BEFORE IMPLEMENTING CONTACTLESS
1. Is it user-friendly?
To understand if your company's contactless payments system is user-friendly, hotels and restaurants must confirm that the system is easy to implement and minimizes the human interaction needed by providing an intuitive interface.
− Franco Zaro, director of business development at Valid
2. Can our current payments partner handle a contactless transition?
Just as with the EMV transition in the US, contactless is proving a challenge for legacy players who maintain antiquated platforms. While enabling contactless is possible with these platforms, they tend to require expensive and time sensitive replatforming and certification processes. Introducing contactless represents a fundamental question around platform readiness for merchants, so they are using the switch as an opportunity to assess their overall solution provider strategy.
− Brian Dammeir, the President of North America at Adyen.
3. Is curbside pickup, self-service kiosks, take-out, or delivery a requirement for the business?
Contactless payment with wireless devices is a much better solution for these business models than the traditional swipe and sign process.
− Squirrel Systems
4. What is the average order size?
Many banks and card providers have set limits on the dollar amount for contactless transactions. Tap to pay was primarily introduced as a convenience feature, larger transactions still require Chip & Pin.
− Squirrel Systems
5. Have we thought about our role in training the consumer?
Smart merchants in the UK, especially QSR and convenience businesses, realized early on that they had a role to play in encouraging consumer behavior, beyond the educational programs run by issuing banks. It’s not unusual at a London coffee shop to be prompted with the question, ‘Contactless?’ as you prepare to pay. This is usually paired with appropriately designed prompts on, and around, the terminal to encourage contactless as well. This has resulted in a cultural shift in these communities away from dip and swipe, where most consumers now instinctually use a contactless flow to checkout.
-- Brian Dammeir, the President of North America at Adyen
Cost is another factor, with many hotel and restaurant properties unwilling to purchase the new hardware.
“For the last few years, merchants were largely hesitant to invest in new terminal hardware to enable contactless, especially considering that many of them replaced their terminal fleet for the EMV transition in 2015,” said Brian Dammeir, the President of North America at Adyen.
It’s important to note that this cost factor seems to apply specifically to hotels and restaurants that were in business prior to 2015.
“Hotels and restaurants that recently opened in the last several months are supporting contactless payments using the latest payment devices either through digital wallets, like Apple Pay and Google Pay, or Tap-to-Pay for credit card transactions,” Kori explains.
Additionally, during the EMV update - consumers were trained to “dip” their cards instead of swiping them, Shipley points out. So “tapping” isn’t even a thought at this point for most consumers.
Another challenge with contactless involves the low purchase limit set by most payment processors, Barrotti notes. That limit is generally set at $100. Of course, this low limit was set to protect consumers – but it makes it virtually impossible to use contactless in the hotel industry and very difficult at most restaurants.
“This is a major factor limiting broader implementation of contactless payments technology in North America,” Barrotti states.
However, despite these challenges, there were some in the industry that were beginning to rollout contactless in the last year or so. Quick service and fast casual restaurants in particular had begun embracing contactless en mass, notes Dammeir. Why?
“It is central to reducing wait times and has coincided with the proliferation of kiosk and mobile order-ahead experiences,” Dammeir adds.
Laurent May, Head of Ready, agrees noting that contactless payment proliferation in the past was largely tied to hardware rollouts including table ordering tablets and portable payment terminals.
However, these solutions might no longer be a viable solution as they are possibly no longer as “contactless” as consumers would like in a post-pandemic world. Instead, guests and the industry at large is pivoting toward facilitating self-order and payment and the rise of virtual kiosks, May notes.
Will COVID-19 Change Anything?
But just how much of an affect will COVID-19 have on contactless payment technology adoption?
“While it is too early to tell how much COVID-19 will impact guest behavior and their expectations, the increased awareness of personal hygiene will accelerate the demand for solutions from the hospitality industry in the short and medium terms,” Kori believes.
Recent data also seems to indicate that it will drive a significant adoption rate among consumers and will encourage American businesses to offer it more widely.
According to an IDC survey of 1500+ U.S. consumers at the end of March 2020, 10% of respondents acknowledged transitioning to contactless payments during the coronavirus outbreak, says Dorothy Creamer, Senior Research Analyst, Hospitality & Travel Digital Transformation Strategies, IDC. This percentage increases to 18% for younger consumers (18-24).
“The introduction of contactless cards was driven by security purposes, reducing the need for cards to leave a customer's possession,” Creamer notes, “but adoption in this case is motivated by concerns over contamination from handing a card to another person or a dirty device. As the concerns over COVID-19 persist, but consumers want to resume travel, the need to offer these options will go a long way to improve customer experience in ways perhaps not previously anticipated by either guests or brands.”
Barrotti agrees.
“Restaurant operators and consumers now have an entirely new level of concern about touching unsanitary pin pads, which can be extremely unhealthy in light of the recent contagion,” he says. “Switching to cash is not an option as it is as much or even more unsanitary. This drives up the necessity for restaurants to install contactless payment terminals to keep their customers feeling safe and coming back.”
While it takes the general population quite some time to get used to and begin to adopt new technologies (again think of dip vs. swipe), “situations like this tend to ramp up adoption rates to be much faster than normal,” Hernandez notes. “I think this will ramp up the adoption rate of contactless technologies in the United States significantly.”
Shipley agrees noting that Wal-Mart, Kroger, and various other retailers have begun implementing plastic shields between the cashiers and the customers.
“We’re going to be reminded everyday, from now on, wherever we shop that we’re not ‘safe’ anymore,” Shipley explained. “This isn’t something that is just going to ‘go away’ or something that we’ll just forget about. It’s going to change the way we interact with people and the way we do business.”