According to a new National Retail Federation and Forrester survey, 67% of retailer respondents accept some form of no-touch payment. The survey found that 58% accept contactless cards, an increase from 40% last year.
Ninety-four percent of retailers surveyed said they anticipate contactless payments to increase over the next 18 months, and 19% think no-touch payments accounted for more than half of their in-store transactions. However, the survey also found that 67% of retailers were concerned about the costs of contactless payments, including fees for processing transactions.
Nineteen percent of consumer respondents said they made a digital payment in store for the first time in May. Of those respondents, 62% used their phone and 56% used a contactless card, per the survey results.
The pandemic is driving increased usage of contactless payment in retail, even as health professionals say there is no clear evidence that COVID-19 is transmitted by cash or credit cards, according to the NRF's findings.
"While mobile payments and contactless cards have accounted for a minority of payments in the past, the pandemic has clearly driven consumers to change their behavior and retailers to accelerate their adoption of the technology," NRF Vice President for Government Relations, Banking and Financial Services Leon Buck said in a statement.
Walmart, Tractor Supply and CVS are among retailers that have adopted contactless payment options recently. Millennial and Gen Z shoppers were the primary users of contactless payments before the coronavirus upended retailer operations in the U.S. However, the NRF's survey suggests that coronavirus pandemic fears have sped up touchless payment adoption, as consumers test the option and retailers place increased emphasis on creating safe and clean environments.
Yet, higher transaction costs are a major concern for retailers. Banks typically charge sellers a fee of about 2.5% for credit card purchases in-store, while 2.8% is charged for cards used online and over the phone. With the increase of buy online, pick up in-store services, retailers are expected to pay about $1.6 billion more in fees this year, the NRF said, citing payments analysis firm CMSPI.
"Curbside pickup and buy online, pick up in-store transactions are treated as 'card not present' online transactions by the processors, so retailers are paying an online rate even when these purchases are picked up at the store," Forrester senior analyst Lily Varon said in a statement. "Retailers feel these are really in-store transactions so there's some pain there."
Beyond the high fees associated with the touchless payments, retailers also cited other concerns, including cybersecurity and data privacy risks (65%), an uptick in fraud (63%) and more chargebacks as a result of disputed purchases (61%), the survey found.