Is contactless making it too easy?

December 06, 2019
Taryn Lee-Johnston

The concept of a cashless society may sound good in theory.  It’s questionable whether it will ever work in practice.  It is, however, indisputable, that cash isn’t king anymore.  Plastic, in its various forms, has long since taken over.  There are lots of practical advantages to using plastic rather than cash.  One of these is convenience.  Chip and PIN transactions are massively faster than cash transactions and contactless transactions are faster still.  Some people, however, wonder if this is actually a benefit or if it could actually be a problem.

The case against contactless

The case against contactless is fairly straightforward.  Some people believe that it makes the buying process just too easy and therefore encourages what is effectively “mindless spending”.  In other words, people just tap their cards without thinking and potentially wind up with a whole pile of “stuff” they neither need nor want and/or a bunch of unrecognisable transactions on their statement.  These transactions will be for small amounts (contactless transactions have to be low-value for security reasons) but, as everyone knows, small transactions can soon add up.

The case for contactless

We all hate queues and we hate them most of all when we’re in a hurry.  The ability to “tap and go” speeds up the buying process even more than the arrival of chip and PIN did and you still get a record of your purchase on your statement.  In this context, it’s worth noting that these days, statements are close to real-time, rather than monthly as they were in the days of paper.

In principle, contactless payments could actually make some purchases a bit more affordable, although it’s unclear how much this translates into real-world practice.  The reason for this is that, as the saying goes, “time is money”, in other words, the faster retailers can process transactions, the more of them they can process in the same time-frame and, in all seriousness, the fact that contactless transactions do not require the retailer to provide a receipt not only speeds up the process it lowers the cost-per-transaction for the retailer.

Even if this fact does not actually translate into lower costs for the customer, it may translate into the difference between the retailer being able to pay human salaries and the retailer not being able to pay human salaries.  Not to put too fine a point on the matter, this is likely to be a significant concern at the best of times and with Brexit (allegedly) happening soon, it could become an even greater concern.

So who is right?

There’s no easy answer to this one, but common sense suggests that contactless may encourage people who were already inclined to make impulse buys but will not necessarily change the habits of people who are in the habit of thinking before they part with their money.

Possibly, therefore, a reasonable solution would be for banks to stop handing out contactless cards by default and start issuing them on request, or, as a minimum, to give customers an easy way to “opt-out” of contactless.  Ideally, if the technology allows it (or can be developed to allow it), customers who opt for contactless would be given the opportunity to restrict their usage limits even further.

This needn’t necessarily be just by volume or value of transactions; it might be more meaningful if customers could apply limits by category of transaction.  For example, a customer might choose to block all contactless transactions except the purchase of travel tickets, so that they limited their options for impulse spending but kept open the possibility to buy travel tickets at maximum speed.