Can we all agree that paying for stuff with a tap of your debit or credit card is perhaps the greatest innovation in banking since the ATM?
There may not be a technology that is more friendly to all generations, from young people to seniors. This helps explain why tap, as accessed via Interac Flash and both Visa and Mastercard, is taking off like nobody’s business in Canada.
Moneris Solutions Corp., the electronic payments processing firm, reports that just over half of credit and debit card payments in the first quarter of 2019 were made with a tap, the first time tap has accounted for a majority of payments. Year over year, tap payments surged by nearly 25 per cent in the first quarter.
Millennials are a big driver of the shift to tap and other forms of electronic banking. But unlike some other technological innovations, tap is a particular benefit to seniors.
Tap is for purchases up to $100. You briefly hold your card up to an electronic terminal rather than inserting the card and keying in your PIN. “In terms of accessibility, tap is a very positive step,” said Laura Tamblyn Watts, national director of law, policy and research for CARP (Canadian Association for Retired Persons). “Inserting the card into the machine can be a real challenge, and people with low vision find the screens very difficult.”
Remembering passwords can also be a challenge, Ms. Tamblyn Watts said. So can mastering all the different payment terminals used by stores and service providers, each with their own quirks.
Tap has its issues – it’s easier to overspend when you’re waving your card around and not getting any paper documentation. There have also been concerns that personal information could be hacked when it’s transmitted from a card to a card reader, although companies in the electronic payments field say they use technology that protects consumers from fraud. There are also zero-liability policies to protect people against fraudulent purchases.
There’s a dark side to tap that is specific to seniors. Ms. Tamblyn Watts says that as use of tap increases, CARP is seeing a rise in financial elder abuse. Basically, people are stealing or misusing credit and debit cards owned by seniors and using them for purchases.
CARP says that two-thirds of elder abuse and neglect is caused by family members or friends – “the unsuccessful son in the basement or the enterprising new best friend,” according to Ms. Tamblyn Watts. Some of these thefts may be facilitated by seniors themselves if they loan a card to someone to buy something for them at the store.
Moneris says the top retail locations for use of tap in the first quarter were drugstores, restaurants and mass merchandisers. Tap accounted for 51.5 per cent of debit and credit card transactions in the first three months of the year, up from 37.7 per cent in the first quarter of 2018.
Convenience is a major reason why tap is so popular, as is increased availability. Smartphone apps let you pay with a tap of your phone, and tap is solving the problem of not having any change when you want to buy something from a vending machine or use public transportation. Vancouver’s transit system lets you tap your credit card to get on, which is great for visitors to the city.
My personal favourite place to tap is the gas station. In freezing cold weather or driving snow or rain, not having to linger at the pump to pay by inserting your card and keying in your PIN (or lining up inside) is huge. The gas station near me also has a tap terminal on the air pump.
A recent survey commissioned by Payments Canada documented the influence of millennials in the rise of convenient payment options. For example, 70 per cent of people aged 18 to 34 say they’re willing to dump cash in favour of other types of payment, compared with the overall average of 62 per cent.
CARP’s Ms. Tamblyn Watts said her organization’s research shows older Canadians are also embracing technology, particularly in the area of banking and financial management. “Older adults are embracing technology,” she said. “They are not embracing inaccessible technology.”
That means anything requiring a complicated onboarding process to get started, a hard-to-manipulate interface or the requirement to memorize additional usernames and passwords. Despite its issues, tap is the great equalizer on accessibility and convenience.
PERSONAL FINANCE COLUMNIST
The Globe and Mail, May 14, 2019