Studies conducted in the wake of the Oct. 1, 2015, Europay, MasterCard and Visa (EMV) liability shift indicate U.S. retailers have been slow to adopt chip card technology, particularly in the small to midsize business sector. The NFC Forum published a white paper Nov. 17, 2015, geared for merchants and aimed at educating them on the benefits associated with EMV card acceptance, which was mandated by the major card brands.
U.S. Retailers: Why You're Not as Ready as You Think for Today's Retail Payments Migration, co-authored by Matthew Bright and Frank Tekampe, makes a case for upgrading to both EMV and near field communication (NFC) technologies. Merchants who are not EMV compliant are liable for fraudulent charges; they may also miss valuable opportunities to connect with customers in the increasingly omnichannel retail environment, the authors stated.
"First, the payment process is one of the final consumer touchpoints prior to use of the purchased product," the authors wrote, adding that loyalty account data, redemption of coupons and other promotional offers have made transactions more complex. "Second, more and more consumers are choosing to pay with their smartphones."
New York-based eMarketer Inc. estimates mobile payments will reach $8.71 billion in 2015, with consumers spending an average of $376 a year via mobile devices. The firm also predicts a 210 percent increase in 2016, with $27.05 billion total spend, approximately $721.47 per person.
NFC advocates expect the ease and speed of proximity payments to accelerate smart card adoption in the United States. Ben Yaniv Chechik, Vice President Product at New York-based Zooz, said he expects payments by smartphone and wearable technology to increase exponentially. "Early adopters are already paying with wearables," he said. "These items that consumers use every day, such as gloves and glasses, have embedded chips that enable seamless mobile payments."
NFC Forum report co-author Bright added, "Migrating from mag stripe to chip is a chore; the ability to process smartphone payments is an opportunity." He described a recent visit to a neighborhood grocer who complained of longer wait times in the lanes due to extended EMV transaction times. The merchant thanked him for using Android Pay, claiming it saved him up to 15 seconds, and expressed the hope that more consumers will adopt this payment method.
Consumers are also seeing the benefits of proximity payments. Allentown, Penn.-based payment processor Harbortouch Payments LLC surveyed 5,000 adults and reported that four times as many survey respondents cared more about transaction speed than security. Harbortouch Chief Executive Officer Jared Isaacman said this sentiment may pose challenges to retailers during busy holiday times. "On average, it takes between seven to 10 seconds to pay using a chip card versus two to three seconds to pay using a traditional swipe credit card," he said. "While seemingly small, during busy times like the holidays, these increased processing times could add up quickly."
Isaacman recommended implementing mobile payment and line-busting options in brick-and-mortar stores to improve POS transaction speeds throughout the peak shopping season.
Despite consumers' apparent overall lack of concern about payment security, a recent study by LexisNexis found that fraud cost U.S. retailers $32 billion in 2014, a 38 percent increase over the previous year. The NFC white paper recommends upgrading to mandated payment technologies. "By accepting only magnetic stripe cards, retailers expose themselves to unexpected costs that could make the difference between profit and loss," the authors wrote. "These retailers urgently need to upgrade their POS terminals to accept next-generation payment options, and their upgraded hardware should enable both EMV chip and NFC contactless technology."
The authors claim that EMV and NFC technologies help retailers protect against threats while increasing digital consumer engagement via smartphones, smart watches, and NFC-enabled mobile devices. "Retailers can upgrade to NFC now to get the chip card and the smartphone payment capabilities at once, with one combined upgrade," the authors wrote.
The NFC Forum, a nonprofit industry association established in 2004, is focused on advancing the use of NFC technology by developing specifications, ensuring interoperability among devices and services and educating the market about NFC. A free copy of the white paper is available at http://nfc-forum.org/u-s-retailers-why-youre-not-as-ready-as-you-think-for-todays-retail-payments-migration/.
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