Article Highlights

Key Takeaway:

Major payments networks say use of contactless payments continues to grow, and that has translated to increased demand for open-loop payments of transit fares.

Key Data:

Visa had enabled nearly 250 transit fare-collection systems globally to accept open-loop payment, said Visa CEO Al Kelly in April. Kelly at the time said Visa research showed that open-loop payments in transit “can bring more than a 15% lift in transactions for merchants in the surrounding neighborhoods,” though he didn’t offer references at the time.

Organizations Mentioned:

Visa
Mastercard

Visa reported this week that contactless payments continued to climb as a percentage of all face-to-face transactions with its brand, mainly at retail, and among the uses the network is continuing to push for contactless is to pay for transit fares.

Visa CEO Al Kelly said during a conference call with financial analysts Wednesday the rollout of contactless Visa-branded cards in the U.S. had reached 370 million as of the quarter ending June 30. That would amount to roughly one-third of all Visa-branded cards in the U.S., a market that was late to adopt contactless payments.

U.S. Banks have targeted the early issuance of their contactless debit and credit cards at large cities, and that showed in the latest penetration figures. Kelly said three cities were above 25% for all face-to-face domestic transactions, New York, San Francisco, and San Jose.

Visa didn’t release a national figure for contactless penetration at retail in the U.S. but during its last earnings call in April, the network said contactless payments in the U.S., had doubled during the pandemicwith a penetration of nearly one in 10 transactions with Visa-branded cards nationwide.

Visa didn’t release global figures, however for contactless transactions at the till either this week or in April, but in its last annual report for its fiscal year ending September 2020, Visa said contactless transactions had grown to 43% of all face-to-face Visa transactions globally, and this would have been 65% globally excluding the U.S. At that time, September 2020, Visa issuers had rolled out 255 million Visa-branded contactless cards in the U.S.

Use of contactless had been growing before the Covid-19 pandemic, but that growth has accelerated because of the pandemic, according to Visa and other payments networks. Visa in April said it had seen a 30% growth in face-to-face contactless transactions in the year starting in March 2020, when the pandemic lockdowns began. Also during that time–as consumers sought ways to avoid handling notes and coins and also to sidestep inserting their cards into POS terminals–the network saw 1 billion additional contactless transactions in Europe.

While there is mixed scientific evidence that notes and coins pose an added risk for harboring the coronavirus, the public is still wary about handling cash.

The growth in contactless has translated to increased demand for open-loop payments of transit fares, as well. In the previous three years, Visa had enabled nearly 250 transit fare-collection systems globally to accept open-loop payment, said Visa’s Kelly in April. That cumulative figure is likely above 250 today. Kelly at the time said Visa research showed that open-loop payments in transit “can bring more than a 15% lift in transactions for merchants in the surrounding neighborhoods,” though he didn’t offer references during the conference call.

Visa said more recently that it is working with around 720 agencies about moving to open-loop, up from 300 agencies 18 months earlier. That latest figure no doubt would include all agencies with which Visa is in discussion stages to move to open-loop.

In addition, Visa said last week it would help lead an Urban Mobility Open Payments Forum, launched by the Brussels-based Union Internationale des Transports Publics, or UITP. American Express and Germany-based fare-collection system supplier Scheidt & Bachmann are also early members of the forum, which will promote open-loop payments for transit.

Visa also reportedly released survey results this week from a nine-market study that it said showed that people are willing to return to public transit following the pandemic with precautions, such as mask-wearing, limits on contact with common surfaces and use of more contactless payments.

Meanwhile, Mastercard’s CEO Michael Miebach told analysts Thursday that contactless penetration hit 45% of in-person purchases globally with Mastercard-branded cards as of the quarter ending June 30, 2021. That is up from 37% a year earlier. The figure would have included the U.S., though Mastercard did not release any breakdown for penetration of contactless payments in the U.S. itself or for global transactions without the U.S. Rates of contactless payments penetration globally with and without the U.S. for Mastercard would be similar to that of Visa.

Miebach also said Thursday that card-not-present and other e-commerce continued to grow at a strong rate, as expected, and that use of in-store cards, helped by contactless, continued to improve during the quarter.

Mastercard has also said it has helped more than 250 cities move to open-loop payments.

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