Better Late Than Never
Chip cards are far from ubiquitous in the United States, but the environment continues to evolve as more and more issuers and merchants embrace the technology. Chip cards are an important step for improved card payment security, but as we increasingly prioritize cardholder and merchant needs for convenience and efficiency, contactless card payments will become the next phase of the EMV migration in the United States. This is especially true as one of the biggest issues with acceptance of chip cards has been both cardholder and merchant dissatisfaction with slower transaction times.
Consequently, many institutions are strategically looking to issue dual-interface cards that add contactless technology to the current contact-based chip cards as part of the next phase of their chip card rollout. History shows us that this is nothing new. Contactless or “tap & go” was phase two of the chip card migration in Canada and the United Kingdom, and in fact, every major market. There is no reason to believe that the U.S. will be any different. The U.S. market hasn’t resisted contactless payments, it simply committed to a ‘contact only’ chip rollout as a first step.
Cost vs. Consumer Experience
ROI has been one of the leading issues with the EMV migration for both issuers and merchants. However, as part of their EMV terminal upgrade, many merchants also included the contactless capability. In many cases, their readers are “contactless-ready,” but not enabled. For issuers, adding the contactless feature to their chip cards will significantly increase their ROI challenge. Dual-interface cards that are contact/contactless are more expensive, adding approximately 65 cents – $1.00 per card.
Even with the ROI challenges, contactless cards hold the promise of driving more usage in situations where contact-only chipcards have not yet met cardholder expectations. For instance, many cardholders have expressed irritation with the payment process for chip cards due to delays at the point-of-sale. Such delays are negatively impacting card usage in sectors where speed and convenience of payment are paramount. Cards capable of both payment types could solve such problems.
During its EMV rollout, Canada took a more enlightened approach. Early in the process, issuers and merchants recognized the value of contactless and quickly adopted dual-interface cards. They specifically targeted the markets where convenience and speed are vital parts of the consumer experience and wanted to ensure the critical mass of cards and POS terminals needed for a seamless transition toward contactless. Currently, almost all Canadian cards and terminals are dual-interface capable. Similar to what happened in Canada, U.S. transit systems, especially in major urban areas, have either installed or announced plans to deploy contactless technology.
Already Contactless Ready
The reality is that a chip card, and for that matter, any card payment, is not as hassle-free as cash for small and micro payments. However, convenience stores, QSRs, bars and cafés – places where cash is still king – are ripe for contactless tap & go payments as a way to continue to meet their need to service customers quickly and efficiently. The good news is that many of these quick-pay merchants already have the hardware necessary to accept contactless payments. With a software upgrade and enough dual-interface cards in circulation, the contactless payment environment could quickly reach critical mass.
Mobile and Card Payments Must Align
It is also important that as mobile payments grow in popularity, the cardholder experience remains seamless, whether using a card or mobile device. Contactless cards will help make that happen. The fact that a contactless payment is triggered from a dual-interface card or a smartphone is largely irrelevant to the consumer. What matters is that the transaction is processed quickly, securely and conveniently.
Call to Action
Non-EMV contactless card technology has been around for years, but has failed to gain significant traction in the United States to date. Some would argue that the introduction of contactless card technology solved a problem that didn’t exist. However, the situation has changed dramatically with the introduction of chip cards. In addition to security concerns, cardholder satisfaction in terms of transaction speed and convenience, along with merchant requirements for efficiency, are at the forefront of the chip card payment experience. Dual-interface chip cards are a solution to these issues and will improve the chip card payment experience.
Even though U.S. banks may be behind the curve with the deployment of contactless cards, there is an opportunity to learn from the pioneering efforts in the countries that have already embraced them. While the United States has a larger ecosystem with higher volumes and more debit networks than other international payments systems, the consumer demand is similar, and it is vital that the customer experience be the same.
At this point, institutions that are late adopters of chip cards should seriously consider a move directly to dual-interface cards. Similarly, those banks that are well into their chip card migration cannot rest just yet; they need to plan for the rollout of contactless payment mechanisms.
In keeping both consumer and merchant desires and requirements top of mind, there is still time for U.S. financial institutions to be leaders in contactless and mobile payments. The market is ripe and eager for a better chip card payment experience, but be aware, the window of opportunity to be a leader will close fast as dual-interface cards become the norm.