Stay-at-home orders and social distancing measures to protect oneself from the coronavirus infection have seen an increasing number of people going for contactless payments. Plastic money and mobile wallets have been among the few beneficiaries of COVID-19 with more people shopping online.
Now, with fears of a second wave of coronavirus now gripping the country, it is likely that contactless payments are going to become the new normal.
More Americans Using Contactless Payments
According to a new research by Crowdfund Insider, in May, 50% of U.S. consumers reported using contactless payment methods at least four times, with 69% agreeing that this mode is more convenient than cash. Also, 60% of U.S. consumers said using contactless payment during the pandemic has made them more comfortable with the idea of using the method in the future, which is a sentiment with the potential to trigger a domino effect for contactless adoption in the United States.
In fact, many stores are encouraging customers to use contactless payments as much as possible to reduce the virus' spread. Research also suggests this shift to contactless payment is likely to create a sustainable change in attitudes that will last long after all the restrictions tied to the pandemic have been lifted.
Economic Impact Payments, E-commerce Drive Contactless Payments
Although retail sales have taken a beating owing to the pandemic, there has been substantial growth in online sales. According to eMarketer’s latest report, e-commerce is expected to jump 18% this year to $709.78 billion, representing 14.5% of total U.S. retail sales.
Also, the United States witnessed the government going for contactless payment by transferring the Economic Impact Payments (EIP) amount directly to the accounts of the eligible recipients. The Treasury-sponsored EIP Card is a method to securely transfer money into the accounts of the eligible recipients and contains the money received by Americans as a result of the Coronavirus Aid, Relief and Economic Security Act (CARES Act). Following the coronavirus pandemic, more than 140 million of EIP worth $239 billion has already been disbursed through direct bank deposits.
Also poised to further transform the payments landscape is 5G technology, which is expected to come to fruition in mobile networks later this year. By eliminating connectivity issues across the transaction process, 5G will help decrease the time between when a payment is made and the confirmation of that payment for consumer transactions.
Mobile Wallets and Banks Benefit
The United States has been late in adopting the concept of contactless payments. In 2018, just 3% of cards in use in the country were contactless versus around 64% in the U.K. and up to 96% in South Korea, according to a study by global management consulting firm A.T. Kearney. However, the COVID-19 pandemic has changed the mindset of many.
This has been benefiting companies in the contactless payments space such as Alphabet, Inc.’s (
GOOGL Quick Quote GOOGL - Free Report) Google Pay and PayPal Holdings, Inc. ( PYPL Quick Quote PYPL - Free Report) . Google is reportedly planning to turn its Google Pay app in the United States into a one-stop shopping platform. Google employees have reportedly been working to persuade grocery stores, gas stations and restaurant chains to sign up for the plan.
PayPal last week said that it will roll out a permanent QR code feature in 28 markets including the United States that will allow buyers to scan seller QR codes in order to pay for items in a touch-free manner using their PayPal wallets.
Also, companies in the card space like Visa Inc,
(), Mastercard Inc. ( V Quick Quote V - Free Report) MA Quick Quote MA - Free Report) , American Express Co ( AXP Quick Quote AXP - Free Report) and Citigroup Inc. ( C Quick Quote C - Free Report) are likely to benefit due to the surge in contactless payments. In the United States, Citigroup saw an 84% increase in daily mobile check deposits in May and a tenfold surge in activity on Apple, Inc.’s ( AAPL Quick Quote AAPL - Free Report) Apple Pay as quarantined customers used digital and contactless tools to handle their financial activities. PayPal, Alphabet, Mastercard, American Express and Visa, each carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Visa is poised to cash in on the thriving payments space, given its vast international reach, superior brand value, solid capital position and hefty capital infusion in technology.
Also, Mastercard is experiencing a revival in business volumes, driven by normalization in some markets, attributable to the gradual reopening of businesses. Mastercard is also witnessing buoyant demand for its Data & Analytics and Cyber solutions.
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