Contactless payments: The bridge to the digital world

BY RODOLFO DURAN

Wednesday, March 20, 2019

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The contactless payment fever is one of the biggest trends in the area of payments. In some countries, such as Australia, Canada, and Poland, the habit of bringing the card close to a payment terminal and paying for the purchase has already become something as ordinary as buying a cup of coffee.

In Latin America and the Caribbean the pace of adoption of contactless payments is still far from ideal. The use of cash prevails in 85 per cent of transactions in the region.

It is interesting to note that the same consumers who use cash are so obviously increasingly adopting e-commerce. In fact, online shopping grows at a rate 2.5 times faster than purchases at physical stores in Latin America and the Caribbean, a sign that consumers are looking for the convenience of shopping with a few clicks without leaving the comfort of their homes.

When cash is still the dominant form of payment, it is difficult to talk about an optimal online shopping experience. According to a study published by consulting firm Statista, 35 per cent of consumers who buy over the Internet in Latin America and the Caribbean pay for their purchases with cash at the time of delivery. In Brazil, the largest market in the region, “boletos bancários” (bank orders) are responsible for 3.7 billion transactions per year or 25 per cent of all payment transactions in online purchases.

That's where contactless payments come in. There is a direct correlation between the use of contactless payments and the reduction of cash usage. When consumers become familiarised to the ease and convenience of paying for their purchases by only bringing their card close to the terminal, replacing cash for electronic payments is a natural consequence.

The effects of the elimination of cash and the digitalisation of payments to the society are numerous, but one in particular is the promotion of the financial inclusion of millions of people who are currently excluded from the system.

With the development of new technologies that ensure the security and the integrity of online payments, such as tokenization and the use of biometrics for payment authentication, the line separating physical and digital payments will become even more fragile. A consumer familiarised with the use of contactless card for purchases in traditional businesses will be more likely to migrate to a wallet to transact in the virtual world.

— Rodolfo Duran, vice-president business development, Mastercard, Latin America & Caribbean


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