Contactless cards gaining traction amid Covid, digital push
Banks and non-banks are increasingly introducing contactless credit cards in Bangladesh as the tap-and-pay technology allows users to make payments digitally and avoid close contact with the staff of stores during in-person purchases.
Over half a dozen banks have rolled out contactless cards since 2018, and its popularity has accelerated because of the coronavirus pandemic.
Currently, there are about 4.5 lakh contactless credit cards in circulation in Bangladesh. Since its inception, transactions through them have grown 70 per cent on an average annually.
About 42,000 point-of-sale (POS) terminals process contactless transactions.
"The use of contactless cards is increasing. This is the future of payments as it covers all safety aspects," Syed Mohammad Kamal, country manager of Mastercard, told The Daily Star.
Contactless payment method works by tapping a card near a POS terminal equipped with contactless payment technology. It allows users to avoid touching the terminal compared to swiping or inserting a card.
While it is often referred to as tap to pay, no tapping actually takes place.
City Bank is one of the first lenders that has brought contactless cards to Bangladesh.
Its current contactless products include American Express Platinum Card, American Express CityAlo card, American Express Biman Card, American Express Agora Card, and Visa Platinum card.
The bank is investing heavily in building infrastructure and has so far deployed 27,000 POS machines that have the contactless capability to cater to the market.
Dhaka Bank launched contactless credit cards in 2018. All of its Visa and Mastercard credit cards are contactless.
"Contactless payment system has paved the way for a cash-less society, and it is overtaking traditional card payment. It is widely used globally as a secure mode of payment," said HM Mostafizur Rahman, head of retail business at Dhaka Bank.
"Covid-19 has created an opportunity to migrate to cards from cash."
Between January and August, the domestic contactless transactions of Dhaka Bank grew 162 per cent year-on-year. International contactless transactions were up 103 per cent.
In Bangladesh, only credit cards are allowed contactless transactions. However, industry people say it is important to enable debit and prepaid cards to offer the facility so that more people can experience such payments.
In 2020, Bangladesh Bank raised the spending limit on each use of contactless credit cards to Tk 5,000 from Tk 3,000 to popularise it.
As the first state-owned lender, BASIC Bank launched a dual-currency contactless credit card in December.
Eastern Bank Ltd (EBL) has rolled out Visa and Mastercard-branded contactless credit cards. It has about 1.9 lakh credit cards, out of which 20 per cent are contactless.
The bank's all 5,000 POS terminals offer the facility.
"We have not launched all products as contactless because all of our POS devices are not equipped with the solution," said Ahsan Ullah Chowdhury, head of digital financial service at EBL.
The bank is issuing new credit cards with contactless features.
The price of a contactless card is 1.5 times traditional cards.
In the developed countries, contactless cards are used to buy the tickets for bus and train services as it has an easy tap-and-pay feature.
"This type of card can be used after the launch of metro rails in Dhaka as well," Chowdhury said.
Industry people say many merchants don't know how to use contactless cards as no banks have run a comprehensive campaign to encourage it so far. The lack of POS equipped with contactless solutions poses another challenge.
Standard Chartered Bangladesh introduced contactless credit cards in August last year at the height of the pandemic as it looked to give a boost to the tap-and-pay feature for small transactions, like paying bills at coffee shops and fuel stations or buying tickets.
About 30 per cent of the bank's 1.25 lakh credit cards have the facility. Its new issuances are also contactless, including debit cards.
But, the contactless feature in the debit cards has been kept disabled as the regulator is yet to approve yet.
"As the needs of our clients evolve and grow, we stand steadfast in our commitment to providing them with innovative and technologically advanced, world-class solutions," said Sabbir Ahmed, head of the consumer, private and business banking of the multinational bank.
In July 2018, United Commercial Bank became the first lender in Bangladesh to roll out contactless cards. It has witnessed 50 per cent average year-on-year growth in transactions since then.
"It's a new concept, and customers are not familiar with the process, which is the main challenge facing contactless payments," said Nehal A Huda, head of cards of UCB.
The bank has around 35,000 contactless cards, which account for 60 per cent of all of its credit cards in circulation.
It has deployed around 12,000 POS machines at merchant points, and all accept contactless cards.
If the central bank makes it compulsory for every credit card transaction to go through the tap-and-pay process, the contactless payment will receive a boost, bankers say.
Brac Bank launched Visa contactless credit cards in the middle of last year. It has more than 9,000 POS terminals, and the bank is gradually converting them into contactless ones, said Mahiul Islam, head of retail banking of the bank.
Mutual Trust Bank has issued 40,000 contactless cards since its rollout in December 2018.
It has about 3,500 POS terminals, and 1,300 of them process contactless transactions, according to Shafaquat Hossain, head of SME and retail banking of MTB.
LankaBangla was the first non-bank financial institution to have launched contactless credit cards in partnership with Mastercard in September last year. It rolled out Visa-branded credit card the following month.
It has 1.45 lakh credit cards, and 85 per cent of them are contactless, said Khurshed Alam, head of retail business at the firm.
Contactless transactions, as a share of in-person transactions, were up at least 50 per cent in more than 100 markets in 2021, according to Mastercard.