The Contactless Credit Economy
As we near the one year anniversary of Covid lockdowns with many places still experiencing restrictions and stay at home orders, the end is not entirely in sight. Even those places that have opened back up are still practicing social distancing and hygiene protocols to stem the tide of infections.
One area that has taken this into account with their fundamental design and use is credit card companies. Credit cards are a way of life, not only in America, but all over the world. The latest trend in this industry is not rewards or cash back, but a significant shift in actual design of the product itself — going vertical.
Banks and retailers were already moving towards the cashless, contactless technology before COVID, but have now started moving away from horizontal designs and are starting to issue cards with a vertical (or portrait) orientation instead. Part of the philosophy behind this is that swiping or inserting a magnetic stripe horizontally is increasingly being phased out as more consumers prefer to tap their cards at checkout for a touch-free transaction.
The pandemic has reduced consumer spending on things like travel and dining, but when Americans are stepping out to shop, they’re increasingly looking for ways to avoid high traffic areas of touch, like grimy card readers. That’s where tapping comes in.
Banks have issued 300 million Visa cards that can be tapped at checkout in the U.S., and 260 of the country’s top 300 merchants have added the capability in their stores. For retailers and consumers alike, it’s the speed and hygiene implications of a contactless transaction that’s most appealing. Hygiene-wise the difference is obvious. No touching equals no chance of picking up something nasty on your hands or card. In terms of speed, tapping takes an average of 12.5 seconds, compared with 26.7 seconds for a conventional card payment and 33.7 seconds for cash. [
Credit cards aren’t going away — not by a long shot. In 2019, the average credit card debt per U.S. household was $8,316. That's $1.061 trillion in total credit card debt divided by 128 million U.S. households. This exceeds the pre-recession record of $1.02 trillion reached in 2008.
A rise in credit card debt usually signals an improving economy, and it could certainly be argued that before covid, the economy was in excellent shape. It shows that Americans’ confidence in the economy is high, more people are working and earning a salary, and have more money to spend. However, this mind-set also affects how they save. Confidence has obviously been shaken in the past year, and unemployment numbers have seen record highs.
Not surprisingly the reliance on credit cards has increased over the past year as well. Over half of Americans (about 51 million people) added to their credit balances since March of 2020.
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