If you go around and ask people how often they use their mobile payment technology they’d probably say “What?”, or try to go out in your hometown and interview half the merchants asking them if they accept mobile payments and you’d probably hear “Oh we’re not set up for that.”
It seems like this is a new technology, one that hasn’t really had the chance to become mainstream yet. But that’s not necessarily the case. Mobile payment technology is really not that new. In fact, it has been around for several years now. Apple Pay debuted in fall 2014 and Samsung Pay just a year later, but what might surprise you is that MasterPass by MasterCard has been active for going on 5 years. MasterPass (which is really an extension of MasterCard’s earlier version PayPass) was first rolled out in Australia in Feb 2013 with the intention of focusing on “convenience, accessibility and security” for their customers. In fact, in most European nations mobile payments have become a thread in the fabric of society and they couldn’t imagine paying any other way. Despite the fact that the payment technology has been around for several years now, Americans are still slow to catch on. In 2016, only 16.5% of the 232 million smartphones in use were used to make a mobile payment. When surveyed 80% of Americans said they had never used a contactless payment system, a start difference from the 80% of Australians and Brits how do!
It’s part fear and part lack of education. A lot of business owners still don’t fully understand the mobile payments technology and many think they don’t accept mobile payments, or you may hear them state that they are not set up to take mobile wallets or digital payments. They also often think it will be expensive for them to set up. That alludes to the fact that there are alot of MSP’s (merchant service providers) out there that are not taking the time to educate their customers.
Consumer’s have also been slow to adopt the technology due to security concerns. And then there is just the sheer fact that most people in general don’t adjust well to change.
But all that will start changing pretty quickly over the next 2 years.
According to BI Intelligence, mobile payment volume is expected to swell to $503 billion by 2020. Part of that might be due to a big push from MasterCard and Visa who have decided to require that all retail establishments be outfitted with contactless payment compatible terminals by 2020.
There are a lot of misconceptions and myths around mobile or contactless payments so I wanted to take this time to help people understand more about the technology, how secure it truly is, and why every merchant can benefit from learning more about it.
What exactly are contactless payments and how do they work?
Mobile payments, contactless payments, mobile wallets… they’re all basically referring to the same thing: the ability to pay for an item simply with a tap of your mobile phone. What is a mobile wallet? Technically a mobile wallet is an app that stores your credit/debit card information and allows the communication of that information which enables you to complete the mobile, or contactless, payment. Apple Pay, Samsung Pay, Android Pay and MasterPass are all mobile wallets. So when you accept Apple Pay you also automatically accept Samsung Pay and all of the others. I read a survey where merchants were asked if they accepted various different forms of mobile wallets such as Apple Pay and Samsung Pay. The results were interesting. 36% of merchants said that they accept Apple Pay, where only 18% said that they accepted Samsung Pay. why is this so interesting? Because if you have a terminal that is capable of transmitting from a digital wallet, ie Apple Pay, then obviously it can also take any of the other mobile wallets, including Samsung Pay. What this really tells us is how little merchants actually understand about the technology.
These digital wallets operate through what is called Near Field Communication or NFC. This allows a chip in the phone to communicate with a chip in the terminal and transfer payment information without swiping the physical card or using the EMV chip. From there the transaction data is transferred from merchant to bank and back to merchant the exact same way as normal.
All merchants in the country were required to update their terminals so that they would be EMV chip compliant by Oct 1st, 2015. Most of the old swipe terminals do not have the NFC capability, however, 90 percent of the new terminals that were installed for EMV compliance are already equipped with NFC capability. So, even if a merchant doesn’t think they have been set up to accept mobile payments, most likely they already have the capability. The technology is there, but it is up to the merchants to turn it on. This is where a good MSP comes in. They need to take the time to educate their merchants on the products and benefits of using them. This ability for merchants to refuse to use NFC is adding to the problem. CVS and Walmart are notable merchants that won’t turn it on. The reason is simply their selfishness. They have their own mobile wallet, Walmart has their own Walmart Pay, and they want to force people to use it. But this makes is very confusing for consumers who typically use their Apple Pay or Samsung Pay and then when they walk into a Walmart and want to check out and can’t use it. It makes people unsure of when and where it will work. It’s not that they don’t have the capability, it’s that they won’t use it.
Dispelling the myths of mobile wallets and contactless payments.
Many businesses are under the impression that there are additional fees in order to take mobile payments- That is simply not true. Your fees are based on the card type that you are accepting. You will be charged the same credit card fees as you would had the customer swiped the card. Sure, there are times with a merchant account where how you take a card will affect your price. Like where a card-not-present transaction is concerned, you will pay a slightly higher fee when the card is not there to swipe or put the chip in the terminal and the number is hand entered. But this is not the case with NFC, the transaction is still treated as if the card is present.
Where security is concerned…
A lot of consumers are worried about security when using Apple Pay or any mobile wallet for that matter. But these transactions can actually be more secure than using the actual plastic, even with the EMV chip due to multiple layers of dynamic encryption. Because the user needs to authenticate the transaction first by using either face ID, touch ID or entering their passcode it could be considered more secure through double authentication. There is also something called tokenization. When you make a purchase using a card stored in your mobile wallet the actual card number is not sent between entities. With tokenization a unique, randomized set of numbers is created for each new transaction. Mobile wallets use tokenization to transmit the payment information, where the credit card number has been converted to a unique algorithm for that specific purchase, making it much more difficult for the card information to be hacked and captured and ultimately more secure. And the card number is not actually stored on the device either. It has also been converted.
There are many benefits for both the consumer and the merchants where mobile payments are concerned. One of the things that has been so frustrating to cashiers and customers alike is how agonizingly long it takes for an EMV chip authorization to take place. From having to leave your card in the terminal forever to that annoying buzz people everywhere are complaining. But none of these problems are the case with digital payments. With a tap of your phone the payment can go through before the cashier can tell you they can’t take that kind of payment.
Apple pay, as well and many other mobile wallets, are about 50% faster than using the chip!
And you don’t have to worry about misplacing or using your card. Most people already have their phones in their hand, or at least handy. Recently, I witnessed just how convenient becoming used to using mobile payments can actually be for consumers. I was in line at a busy grocery store when the woman in front of me realized she left her card in another pair of pants. Really. All of her groceries had already been rung up and the clerk was bagging them. The look of panic and embarrassment was obvious on her face as she almost panicked. Then her eyes lit up and she said “Oh! I can pay with my Apple watch! Can I pay with that? Do you take that?” And guess what the cashier said….”I don’t know, try it.” A second later the payment went through, the elated and relieved customer grabbed her groceries and we all went on with our day. Woo hoo! Crisis averted.
The transactions are quicker, there is no signing of the slip and its even more secure than EMV chip card use alone, and you don’t even have to have the card on your person.
How to accept Apple Pay (and all the Pay’s) in your store.
First of all, you may already be capable of taking contactless payments. In order to accept digital wallets you must have a terminal that is NFC compatible. But again, remember that your terminal should’ve already been updated when it was required to update to EMV chip compliance by October 1, 2015.
Check your terminal and look for the symbol letting you know it is NFC compatible. Depending on the manufacturer it may say NFC, it may have a picture of a wireless symbol or say something like “touch ready” or “contactless” when you fire it up. If for some reason your terminal is not NFC capable you need to upgrade. This is not an outrageous expense for most merchants. New terminals run anywhere from $150-$400 depending on your needs. Don’t forget, never lease!
Merchants that process payments through a point-of-sale terminal will have to make sure that they have a USB reader that is NFC compatible. This isn’t really a problem, except for where the POS provider who is out there selling their POS systems to all of their retailers but has not updated their POS systems with the programming to be NFC compatible. This unfortunately is a problem of the companies selling POS systems and not your merchant service provider.
How are returns processed with Mobile Payments?
Luckily they are processed the same way they always have been. Just in the same way you would with a traditional credit or debit card, you would use the Device Account Number to find the purchase and process the return. The customer would select the card that they used in the purchase, tap or hold their device close to the terminal and use Face ID, Touch ID, or a passcode to authorize the return.
You will want to display the proper decals and signage to let your customers know they can use the various mobile wallets in your store. Most of the larger mobile wallets like Samsung and Apple will provide you with a kit.
It is up to merchant service providers to educate their clients to the benefits of being mobile payments ready, and it’s up to retailers and all merchants alike to help to educate their customers and keep them apprised of the payment options they to offer their customers. Together we can help
At Bankcard Brokers we take the role we play in our client’s success very seriously. All of our brokers hold the rare “ETA certified payment professionals” certification and are dedicated to providing truth and integrity in credit card processing. Give us a call today to make sure that you are equipped with the latest technology to keep your business on the cutting edge and ensure your success.