Bill Hardekopf
By Ray Birch
BIRMINGHAM, Ala.—Will EMV speed adoption of mobile payments? Several experts think so, especially during the holiday shopping rush.
The chip card “dip,” which is slower and less convenient than the swipe, will likely frustrate more consumers who may instead begin pulling out their phones to tap and go, several payments analysts predict.
That’s because many new EMV terminals are also equipped to handle near-field communications (NFC). The lack of availability of NFC-capable POS terminals has been slowing mobile payments adoption, but their numbers have been growing post-liability shift deadline.
“Now that credit card transactions will be slower, mobile payments may have an opportunity to change the way consumers pay,” said Bill Hardekopf, CEO at LowCards.com, citing that mobile payments have not been very popular. Earlier this year, a study by Placeable showed that 90% of consumers have not used mobile payments when available, he said.
“One of the issues with this new EMV reader is that the transactions are slow and involve several steps,” Hardekopf explained. “In fact, just a few weeks ago, Walmart executive John Drechny predicted a more chaotic holiday shopping season due to the change. He felt the EMV transition would cause confusion and longer lines during the Christmas rush.”
Tap Faster Than Chip 'Dip'
Dean Young, SVP of industry engagement at PSCU, St. Petersburg, Fla., said the “reality” is tapping over swiping mag stripe has been no huge benefit, and has given consumers little reason to use a digital wallet.
Dean Young, PSCU
Jamie Topolski
“There is a cool factor with tapping the phone,” said Young. “But at the end of the day if consumers decide dipping is not a great experience, absolutely EMV could drive adoption of other digitally enabled services.”
As more point-of-sale devices become NFC enabled, and cardholders are required to change checkout behavior as a result of EMV, mobile payments will become increasingly attractive, said Melissa Santora, product strategist, card services, Fiserv, Brookfield, Wis. “These factors will help to change consumer behavior from card to digital device.”
And mobile being a secure payment form won’t get in the way of that migration.
“From a security standpoint, tokenization is utilized in most digital wallets, which allows a cardholder’s token to be suspended or burned in case of a device compromise without reissuance of a card,” said Santora. “As consumers slowly move to mobile payments, the education of tokenization and the benefits of its security will follow.”
Mobile Security
Tokenized mobile transactions are safer than plastic EMV transactions because they require the additional layers of fingerprint and/or PIN verification on the phone, explained Brandon Kuehl, manager of product development at The Members Group in Des Moines, Iowa.
TMG Product Manager Chole Casber emphasized the advantages of dual interface EMV.
“Yes, it’s no secret EMV dip transactions take longer. Tap EMV transactions, on the other hand, provide an experience much like a mobile wallet,” said Casber. “That’s precisely why issuers should look for a partner that allows them to choose the interface-—contact, contactless or dual—of their EMV chip cards. The proliferation of NFC-capable terminals will further demonstrate the value of dual-interface EMV cards.”
Yet some experts noted that despite the liability shift deadline passing, many merchants are not EMV ready, which typically means they are not NFC ready as well.
“Merchant acceptance of EMV is still hit and miss,” said Brian Day, director of digital strategy at TMG. “Therefore, the slower dip experience won’t be a major driver of mobile just yet. Something else to consider is that many EMV-ready merchants, like Walmart, for example, have not yet enabled the contactless capabilities of their terminals. So consumers’ mobile pay choice with those merchants today would be limited to Samsung Pay.”
Mag Stripe Fallback
In addition to using NFC, Samsung pay also uses "magnetic secure transmission," which "spoofs" a traditional card swipe with magnetic fields when users hold their device near a payment terminal.
Jamie Topolski, director of alternative payments at Fiserv, agreed with Day, noting consumers have a plastic fallback, as well.
Brandon Kuehl, TMG
“This year, consumers will reach for a credit, debit, or prepaid card, because they are confident that it will work at all merchants,” said Topolski. “If the EMV chip isn’t yet supported, the mag stripe will still work.”
Michelle Thornton, director of product development at CO-OP Financial Services in Rancho Cucamonga, Calif., does not see consumer frustration with EMV paving the way for greater mobile usage.
“The potential frustration of using a chip card is very real, but I don’t believe consumers will recognize mobile as a better option,” Thornton said. “I think the only consumers that will make that connection are those who are using mobile payments a lot already . . . I do think that EMV will have an impact on mobile in that more NFC terminals will be deployed, which will drive mobile usage.”
Day emphasized that consumers will eventually decide the payment type winners, gravitating toward solutions that are the easiest to use.
Brian Day, TMG
Michelle Thornton, CO-OP FS
“We saw that happen as people moved from cash to checks and then to plastic,” he said. “As acceptance of EMV and contactless become more consistent, more consumers will observe the differences between dip and tap.”
What Day sees as a more likely near-term driver of mobile payments is coupons and loyalty schemes.
“If a consumer can pay with his or her phone and that tap includes coupon redemption or earning loyalty points, that could be enough to help determine plastic vs. phone,” Day said.
Merchants Want Speed
TMG’s Kuehl thinks slower EMV transactions will drive mobile usage due to decisions made by merchants more than consumers.
“Quick-serve merchants—fast food, coffee, convenience—were the first adopters of contactless payments. Why? Because their business models depend on speed, and contactless is faster,” he said. “Other retailers are likely to follow suit. Walmart, for example, has said EMV dip transactions take five-to-ten seconds longer than a mag-stripe swipe. If you consider Walmart receives millions of transactions each day, those extra seconds add up to a lot of time, and time is money. Transaction limits on contactless have been lifted, as well, so that’s another factor retailers are considering in their decisions to enable contactless. Even merchants that were strongly against contactless have changed their tune now that EMV has gone live and they have recognized some of the pain points. They are now scrambling to figure out how to accept contactless transactions.”
PSCU’s Young summed up the advantages of mobile payments that—thanks to EMV—may now become clearer to consumers.
“It’s the path of least resistance,” Young said. “Choices on payment types will be made based on what will make lives simpler, easier and safer.”