According to a report published by DECTA, the advent of contactless payment technologies is not only important for the popularity of digital wallets, but also for the growth of many other new niches.
Global payment processing company DECTA has recently released a comprehensive industry report discussing the role of contactless payments for the security of financial transactions in the future. The report claims that contactless payment technologies will not only make digital wallets more popular, but also boost the growth of new niche industries.
Contactless payment is considered to be the latest breakthrough in financial transactions that eliminates cash and card swiping. Contactless transactions can be carried out safely in seconds simply by tapping a card or mobile device on a payment terminal. The popularity of this emerging payment technology received a significant boost during the Covid-19 pandemic.
In its report, DECTA reveals several key figures related to the rapidly growing popularity of contactless payments.
- Almost half (48.6%) of the e-commerce payments made globally in 2021 were via digital wallets. FIS projects that this transaction value is likely to increase to 52.5% by 2025.
- Compared to 2019, contactless payments surged by 12% in the UK in 2020. Contactless payments accounted for 27% of all UK payments in 2020.
- By the end of 2020, 32% of the UK’s adult population was registered to utilise mobile payments, which meant an increase of 7.4 million people compared to the previous year.
- More than 50% of individuals in the age group of 16- to 34 years were using mobile payments as opposed to just 11% for those over the age of 65.
- During the pandemic, people working from home relied heavily on online and mobile banking to perform banking operations. Online and mobile banking facilities were used by 72% and 54% of UK adults respectively in 2020.
- Around 54% of B2B payments in the UK were made via different forms of online/mobile payments in 2020.
- After the pandemic, 8 out of 10 transactions in Europe involve contactless payments. This indicates a 25% rise compared to pre-pandemic levels.
- 6 out of 10 European consumers use instant payments for online purchases.
- In the US, over 80% consumers made contactless payments in 2021.
- Contactless transaction usage doubled and quadrupled between 2020 and 2021 in India and Thailand respectively.
The security of contactless payments can be attributed to its underlying technology referred to as payment data tokenization. This technology secures user data by swapping sensitive information with non-sensitive substitutes known as tokens. Unlike encryption systems that can be deciphered through a secret key, tokenization doesn’t allow the tokens to be deciphered. This is why tokenization is likely to be the way forward when it comes to data security in e-commerce and mobile payments.
The report by DECTA suggests that payment tokenization will be critical to the growth of several other niches. By connecting payments to digital wallets and ensuring safety via tokenization, it is possible to turn every device into a secure payment method.
DECTA suggests that in the near future, ecommerce sector can benefit immensely by using tokenization technology. As more and more individuals around the world start shopping online for entertainment, everyday needs, and many other services, recurring payments have experienced a sharp incline. Tokenization will be used extensively in the future by businesses thriving on subscriptions or other recurring payments. By using tokenization, they can save the billing information of their customers for the next automatic payment without worrying about the ordeal of maintaining all their data on file.
One-click payment is another convenient feature that allows merchants to provide an option to their customers to pay for a product/service by clicking on a single button utilizing tokenization technology. Ecommerce as well as brick-and-mortar businesses can use the convenience of one-click checkouts to their advantage by safely storing the data of their returning customers and enabling them to finalize a transaction with just one click. It not only eases the purchasing process, but also leads to more sales and fewer abandoned carts.
“Convenience, security and flexibility that come with contactless payments are absolutely crucial in today’s accelerating commerce. The comfort of the contactless payments may influence the customer to make smaller spontaneous purchases. Businesses that are to compete and thrive today and tomorrow are businesses that manage to harness this technology.” Says Santa Kiršbauma, Board Member, Product Offering at DECTA.
Contactless ticketing is another application of tokenization that has already proven to be a game changer, particularly in the UK. DECTA believes that it will continue to expand rapidly in the years to come. Another future application of tokenization could be in the hotel industry, for the safe storage of sensitive guest data.