The rise of contactless payments will be a marathon, not a sprint.
The latest foray into new territory came at the New York City Marathon Sunday (Nov. 7), where Mastercard demonstrated how its “Tap on Phone” tech can turn mobile phones and tablets into payment acceptance devices.
Chiro Aikat, executive vice president of Products and Innovation for North America at Mastercard, told Karen Webster that, on the heels of that event, another pilot is underway on the West coast, where certain public transport travelers in Los Angeles will be getting on-the-job training, so to speak, with Tap on Phone while concurrently gaining the confidence and familiarity needed to use contactless payments in other settings.
In an exclusive interview, Aikat told Webster that Mastercard is piloting Cloud POS technology for the Los Angeles World Airports (LAWA) Flyaway bus service to Los Angeles Airport (LAX). The payments network is working in collaboration with Pacific Coast, helping to make contactless open loop payments more accessible and inclusive.
“You can just tap on the phone with your Mastercard and pay for the fare — where you used to have to do it all with cash,” he said. “This makes it easier for the transit operators, as well as for the consumers,” by eliminating the need to buy cards and keep loading them with funds.
In terms of mechanics, as Aikat explained, transit operators will have access to Android smartphone devices with Cloud Tap on Phone capabilities for accepting contactless Mastercard transactions. Tap on Phone is powered by Mastercard Foundry’s Cloud Point of Sale (POS) technology and leverages Verizon 5G, enabling small- to medium-sized businesses (SMBs) to handle transactions in a fast and secure manner.
The pilot is part of California’s Department of Transportation initiative to enable contactless acceptance across more than 300 agencies in the state.
The NYC and LA announcements come after Mastercard said in a press release at the beginning of the year that it had partnered with NMI and Global Payments Inc. to launch its first live Cloud Tap on Phone pilot with Computer Engineering Group. The software is hosted on Microsoft’s Azure cloud platform.
In the New York event, the cloud Tap on Phone function at the NYC Marathon Expo was powered with 5G technology. Earlier this year, Mastercard and Verizon Business said in a press release they were partnering to bring the high-speed connectivity service to payments, and to enable smartphones or other connected devices to accept payments, which includes Tap on Phone. In terms of the technological benefits, Aikat said that reducing latency and increasing the speed of the payments will help broaden contactless payments reach and appeal.
Scaling to the New Normal
Tap on Phone seeks to bring digital payments, at scale, to a range of entities and especially SMBs, in an affordable and speedy manner, Aikat said.
“This is another step into the future,” he said. “We all talk about the next generation of the POS, and cloud technology is going to be an important driver.”
The phone itself becomes a payment method, and Mastercard’s own most recent earnings results underscore the momentum. Management said that contactless transactions represented 48% of in-person purchase transactions globally, up from 45% in the previous quarter.
“It’s becoming the norm,” said Aikat, especially as more issuers expand into contactless.
Filling the Capital ‘Gap’
Tap on Phone is a complement to SMBs’ existing and ongoing efforts to meet consumers where they want to be met — with touch-free payments — but it also helps fill a critical gap, he said.
“One of the biggest pain points for small businesses is access to capital,” he said. And access to capital encompasses much more than simply being able to tap lenders for loans.
As Aikat explained it, through Tap to Phone, “we’re giving these firms access to their own money more quickly.”
Picture, then, the smallest of SMBs, the sole proprietor — a plumber, perhaps — who typically sends an invoice, waits for payment and might juggle cash flow by commingling accounts or using personal credit to keep operations afloat. He or she deposits the check in the bank and must wait several days for the check to clear to access those funds. Leveraging Tap to Pay, said Aikat, can give that SMB owner access to cash instantly.
Aikat noted that Tap to Phone takes its place as a complement to the suite of SMB services offered by Mastercard that integrates into firms’ accounting and enterprise resource planning (ERP) systems.
Aikat was quick to point out that contactless payments will transform the retail experience at larger firms, too, as the checkout and payment parts of the experience will be fluid. Tap to Phone, conducted in the aisles right upon interacting with salespeople, will relieve the congestion that has traditionally been seen at the register. Retailers, he said, will see higher conversion rates as a result, capturing the consumer right when they want to make the purchase.
Looking ahead, he predicted that contactless payment options for transit users will have a “domino effect” on users’ behaviors. That impact has been in evidence since before the pandemic.
“We’ve seen that consumers start to do more with contactless when shopping close to the places where they were taking transit,” he said. “The merchants around those sites have seen significant growth in contactless payments. With the LAX pilot, we’ll see the same thing. With Tap on Phone, that’s just one more place and way for the consumer to use the contactless device.”