Just as the U.S. lagged behind other countries like Europe, Australia, and Canada in our adoption of EMV secure standards for many years, so are we way behind in our adoption of the use of contactless payments.
Due to the Covid pandemic, the EU is advocating the use of contactless payment methods such as contactless credit cards and mobile wallets. They’re hoping that with less contact with possibly contaminated money, and less contact in general, it will help curb the spread of the virus. European banks are backing the increased use of contactless payments by increasing the transaction limit and encouraging businesses and consumers to use it as a way to lower the risk of contraction.
Cash is dirtier than ever since Covid-19 began circulating.
Cash has always been considered to be very dirty, but with Covid living for so long on various surfaces, it is now more than ever. China has begun a huge initiative to try to clean their paper money. By applying techniques like ultraviolet light and high temperatures, they hope to eliminate the chance the virus lives on bills.
The World Health Organization (WHO) is urging people to use contactless payments wherever possible. Yes, phones harbor a ton of bacteria and germs, but you should be cleaning it often anyway.
Will this be the catalyst that finally drives U.S. consumers and businesses to adopt the use of contactless payments as the norm?
EMV has always been about security. Protection of our data and personal information. Now, the technology may also protect our personal health. Considering the fact that most EMV terminals are also already equipped to accept contactless payments.
The technology allows credit cards, and other devices, equipped with an NFC chip to communicate with the terminal without having to actually touch it. This is the same way that mobile wallets such as Apple Pay, Android Pay (Google), Samsung Pay are able to communicate payment information stored within them to the payment terminal.
Contactless payments utilize Near Field Communication (NFC). Both the contactless credit card and the payment are equipped with an embedded radio frequency identification antenna allowing them to exchange data.
The consumer never has to hand over their card and most of the time they don’t even have to touch the terminal. Europe has adopted what is referred to as “chip and PIN” where the consumer must enter a pin code once they dip their card. However, the U.S. has not implemented the PIN and only just rolled out chip cards with EMV compliance. Many establishments, such as grocery stores will not require any PIN to be entered on the terminal during a transaction. The customer just taps the card near the NFC symbol and the transaction goes through. Oftentimes the consumer doesn’t even have to sign the slip anymore.
Why haven’t we moved to contactless NFC payments sooner?
Prior to the Covid pandemic, there hasn’t really been a push for contactless payments. Even now that we have mandated the upgrade to more secure payment transactions, many businesses still are not EMV compliant. Some, like gas stations, have not met their deadline for compliance. Others either don’t think it’s necessary, or they’re just too small to want to incur the expense of new terminals. Not only does it cost money to buy new terminals that are EMV/NFC capable, but coding EMV into POS systems can be complicated.
There’s also the problem of demand. Merchants won’t do it if there isn’t a demand. Consumers won’t adopt it if it isn’t accepted everywhere. When rolling out the first chipped credit cards big banks chose to save money and began issuing “single-interface” Chip-enabled cards. These cards did not include the RFID antenna for contactless communication.
However, things have slowly been changing as most major card brands have begun switching to contactless credit cards. Most banks are issuing contactless credit cards to their customers when the current one expires. But with a mobile wallet, consumers don’t need to have an NFC chip card to make payments that are contactless. By loading their preferred credit and debit cards into the mobile wallet, they can make contactless payments wherever they encounter an EMV-contactless payment terminal.
Fear and comfort zones drive consumer payment habits.
Fear is one of the main reasons Americans have been slow to adopt contactless payments through the use of mobile wallets. They’re afraid it puts them at risk for fraud. But this really comes down to a lack of education. Many believe that if they store their credit card information on their phones it will be more at risk to cybercriminals.
But in reality, contactless payments are more secure. First of all chip cards are already more secure than mag stripes because the card information is not transferred during a transaction. Instead, chip cards send an encrypted code unique to the specific transaction that is never used again.
In addition, when you use NFC to complete a transaction, payment information is tokenized and constantly changing. It is very difficult for a fraudster to get ahold of any usable information.
Not only are they more secure than the old magstripe, but they are even more secure because you don’t have to hand your card to a possibly unscrupulous teller/cashier. And now they are more hygienic because they aren’t touching it with their grimy hands. Just kidding, but during a pandemic, you can never be too careful.
Mobile wallets go one step further by making it so you don’t even need your card with you. Your phone is something you never leave home without. If you don’t have your card it can’t be stolen. The skimmer on the gas station pump can’t steal the information of it. Not only do consumers have a secure way to make payments, but no one has to touch anything.
Humans are creatures of habit and like to touch things.
Another reason this type of tech hasn’t caught on is the sheer fact that it isn’t absolutely everywhere yet. Like we said before, many merchants still have not upgraded to EMV compliant technology. Gas stations are extending their deadline for becoming compliant. People don’t want to get caught in a situation where they’re holding up the line because their tap-to-pay didn’t work. Better safe than sorry.
Many consumers also simply like to pick the card they want to use out of their real wallets. It doesn’t feel comfortable to open an app, scroll to the correct card, and choose it.
Many times merchants, or their employees, just don’t realize they can accept these types of payments. Merchants that have already become EMV compliant most likely already own terminals that are NFC ready.
I don’t know how many times I’ve had a cashier tell me they can’t take Apple Pay. I just smile as I tap my mobile wallet to their terminal and say “well let’s just try” and viola! payment is approved!
Unfortunately, I blame this lack of education on the sales reps that service the payments industry. Most merchants only know that to become EMV compliant they have to upgrade, spend money on new terminals, and now they “dip” instead of swipe. It is up to the rep to educate their merchants on the functionality included in their terminals and processing software.
Contactless payment adoption could be another longterm ramification of the Covid crisis.
People are shopping online more than ever before, and shopping in categories they hadn’t previously considered for online shopping. But we will eventually get back out there. And it’s very likely that the precautions and habits now ingrained in us will stick with us as we venture back out into the marketplace.
Now, with banks and Fintech doing everything they can to keep up with the changing attitudes of the market and their consumers, they may have to appease the germaphobe side of the human psyche and begin marketing “contactless” as if they just came up with it.
Once there is a marketplace demand, merchants have no choice but to step up and join the game. One thing we know for sure, some habits we’ve adopted due to Covid will stay with us once it’s over. This could possibly be the catalyst that moves contactless payments in the US.
If you have yet to update to EMV compliance, use this downtime to do so. If you’re not sure if your terminal is contactless-ready, give us a call. (It should have a sideways WiFi symbol on it.) Our ETA-Certified payment professionals are educated on the technology and ready to answer any questions you might have about its security and use.