Are new payment technologies DOA?
Through a special arrangement, what follows is an excerpt of an article from FierceRetail, an e-newsletter and website covering the latest retail technology news and analysis.
Apple Pay is dead on arrival. Samsung Pay is delayed. CurrentC won’t even get that far. EMV has negative ROI. Those are just a few of the story lines of the past few weeks. All seem to ignore one important point: this is very new stuff.
When I saw a headline in Forbes — "Why is almost no one using Apple Pay?" — I actually yelled at the computer screen. "Almost no one" is using Apple Pay because it is still being rolled out, it’s only available for the latest iPhones and a good number of those new iPhone users probably aren’t interested in it — yet. A big part of the problem is Apple’s own hype machine, which is promoting the vast number of retailers who will soon be accepting Apple Pay. The ranks are growing, but probably not as fast as they predict.
The postponement of Samsung Pay’s release is even more of a nonissue. Who is to blame them for wanting to get it right, especially with looming competition from Google’s Android Pay? And then what about CurrentC, backed by Walmart and other big retailers? Who knows? Let’s wait and see.
There are questions of how these competing systems will coexist. It would seem that, before Apple Pay can gain traction, there will need to be a payment system on the Android side of the fence, as Android represents more users. The question of fees is never going away.
Source: Apple Pay/VISA video
Finally, there’s EMV not returning an investment said to be $35 billion for the retail industry, as IHL reported recently. I’m not sure we can put a price on a technology that has proven to rein in fraud. Reasonably, many retailers are urging the card issuers to go with chip-and-PIN rather than chip-and-signature because it provides even great security.
Also, it’s imperative to give the U.S. retail industry more time to implement it by pushing back the fraud liability shift deadline. Pointing fingers about the lack of readiness is irrelevant — let’s get it done and get it done right.
It comes down to the old adage, "The customer is always right," and retailers’ customers want more payment options that are also more secure. The payment industry’s customers — the retailers — want chip-and-PIN, as well as a little while longer to transition to EMV. The track record of those who ignore their customers’ preferences is not a pretty one.
- New payment technologies are DOA? Not so fast – Fierce Retail
- Why Is Almost No One Using Apple Pay? – Forbes
- Banks’ rush to embrace Apple Pay resulted in fraud: ‘NY Times’ – Fierce Retail
- EMV is $35B ‘money pit’ for retailers – Fierce Retail
- The importance of pushing back the EMV fraud liability shift deadline – Fierce Retail
- Customers want payment options; many retailers reluctant to invest – Fierce Retail
Discussion Questions
Should there be concerns about the snags that have affected emerging payment technologies? What new or continuing hurdles do you expect these technologies will face going forward?
Poll
BrainTrust
David Dorf
Paula Rosenblum
Co-founder, RSR Research
“Emerging” is the key word. For any payment scheme you have to grow the cardholder and merchant base in parallel and that takes time, especially when large capital investments are required. New payment methods take a while to emerge — think years. During that period we’ll begin to identify the winners, and their acceptance will accelerate. It’s all a normal part of the process.
I would expect periods of growth as well as periods of stagnation along the way. And I wouldn’t declare anybody dead prematurely.
I was surprised at how much fun it is to use Apple Pay, but that doesn’t mean it’s going to be a hit. As the writer points out, there are still a lot of questions to be answered. In any case, I always thought the watershed year would be 2016, not 2015.
Here’s why:
We need to see how many retailers install NFC readers when they do their EMV PIN pad conversions. That would increase the number of places mobile payments would be accepted. I was surprised last week to see that Publix chose to NOT include them in their upgrade.
The next thing to watch is the iPhone 6S replacement cycle. That’s coming up soon, and includes the other major chunk of iPhone users.
Samsung Pay doesn’t even exist yet so we can’t say.
As far as I’m concerned CurrentC isn’t even a player. As the writer says, worse than DOA. It’s not fun, it’s not anything from the consumer side. Retail’s metaphorical rats will continue to jump ship.
But we remain left with a core question: apart from me thinking Apple Pay is “fun,” what problem do mobile payments really solve? The Apple Watch is less than I thought it would be, so you still have to take something out of your pocket.
I remain unsure.
Like so many other categories of technology over the years (starting with Betamax vs. VHS, LOL), organizations and consumers have to adopt the clear winner before any dust settles in the market. In the case of payments, I’m really not concerned about specific “snags” with one provider or another. This is absolutely a matter of reasonable fees for merchants, seamless experience for consumers and international capabilities. Period. Those are the hurdles to overcome.
Until I can leave my wallet at home, this mobile payment is going to be something “extra” I have to do now to pay. It is still far easier for me to grab my tap-to-pay credit card or debit card than pull out my phone, open an app and then tap.
Not being able to track purchases is a big problem for retailers. Apple’s decision to keep the information private to make people feel secure is not going to work for retailers. Tracking credit cards is a great way to track purchasing habits.
Until Apple and other tech start-ups are willing to merge their stuff with Visa and traditional cards into a seamless transaction so retailers do not have to keep buying new front-end equipment, it will go slow. Exclusivity for making a payment may work online, but on Main Street, we need some help.
For me there a many ways to pay on our brand new terminals, and in my simple opinion the new payment systems must merge into mine, or they can provide free terminals for us, as these units are quite expensive to buy.
This may sound standoffish to some, but we have to upgrade to chip technology already, and we’re ready for that, and now the new players want in. Apple and Samsung can pony up their billions into our systems and I’ll be happy to use their service.
No concerns. This is inevitable. Once it hits the tipping point, it will accelerate greatly. Consider what it is replacing and the ease it offers. Any delays are just hiccups.
Stepping back and taking a look at the bigger picture, do we think that payment systems will be more seamless and convenient in a few years than they are now? My personal opinion is yes, as all else being equal consumers will always opt for greater convenience and ease. As such, I view any snags as short term bumps on the road that will get worked through. In terms of hurdles, I think it will always come back to the basics of trading off simplicity and speed against privacy and security (including fraud prevention and what constitutes acceptable losses).
Yes. No one is comfortable placing their private financial access into a technology that is not proven and doesn’t work. We should expect that all of these systems work and are facing no “snags” when they are implemented. This is just like a phone, computer, or any other technology device.
We’re talking about money here — the consumer’s money.
Just as the shift from cash to checks to credit to debit did not happen overnight, so too will be the case with digital pay.
At times the media and tech industry become so excited about their latest and greatest, they fail to take into account that their customers need time to catch up. Because consumers know that the “other people’s money” is their own in this instance, they need to be made comfortable that the kinks are all worked out between technology, retailers, processors and bank accounts.
Each party has to provide assurance that they have their act in order, and then demonstrate the consumer benefit.
The more mud slinging that’s done by CurrentC and their PR operatives, the more they hurt themselves and energize the Google/Apple fans/non-retailer approach.
This is an important enough area to warrant real coverage—perhaps a scorecard that totals the weekly numbers of customers, retailers, developers, innovations, something that tracks payment adoption using boring and real stats. This is a big enough issue where solid reporting would help the industry and save it from itself. Oh, are we rooting for the consumer?
No, with retail focused on a chip and pin date that is looming, there is little time to be spent testing the water on new payment technologies. And anyway, have we even come up with a payment strategy that will be secure?
IMHO, Apple has the nearest thing and people are playing with it. However, if they are not going to play ball with the retailers and share the data, it is dead to me.
And that’s my 2 cents.
I’m not “concerned” by snags—who really thinks any forecast will be 100% accurate—but then I’m not excited by their arrival either. (And perhaps others sharing my disinterest is part of the delay). The move from barter to “money” was a big step; from paper to plastic was another; but from one form of electronic payment (credit/debit cards) to another (mobile pay)…yawn.
Think about the transition from writing checks to using a credit card and how long that took, and in that case the time saving and consumer convenience is VERY obvious. Using my phone to pay doesn’t strike me as being a significant time savings and more importantly, disrupts my multitasking as I am checking news and social media while waiting in line. For me it is actually easier to pull out the wallet to pay while letting my phone stay on the screen I was reading while I am in line.
The “snags” comes down to cost/benefit. There are two issues here: retailers bearing the costs of (1) consumers’ desire for payment options and (2) stopping fraud.
Neither CX nor security is optional. You can’t sit still as the payments world is upended.
Fortunately, over 90% of retailers know shoppers want payment convenience, says FierceIT. The resistance to invest comes from a false sense of security from legacy systems. Retailers are, “relying on older, often less secure platforms, as these are systems they feel more comfortable with.” Newer front-end terminals and back-end infrastructure will close security gaps in the payment stack.
As for fraud, it’s common for retail to point the finger at banks or card networks as the ones who should pay for fraud prevention (and vice versa). Unfortunately, all members of the payments chain need to fund it. It’s like cyber-security. No one actor or one method of protection will keep you safe. It’s an ongoing arms race between the smartest minds in fraud and antifraud. In my experience, the perpetrators are out ahead of the defenders. It’s not a fair fight unless you invest in security.
Concerns? Of course. But change is inevitable in this realm, even if adoption has been somewhat rocky so far. Two factors will drive payment reform: cyber security and convenience.
The chip-and-pin (or signature) cards required by the more secure EMV standard are rolling steadily into the marketplace. Many retailers will not meet the October deadline to install the new payment terminals and software required, according to reports I have seen.
I have noted the replacement of many terminals at stores visited recently in Tucson, Chicago, New York, Charlotte. It’s my current hobby to check these things. Some (but not all) bear the wireless payment symbol that signals potential acceptance of Apple Pay and similar services.
Apple Pay (and I would expect Samsung’s solution) adds a meaningful security feature in the form of tokenization—it transmits a one-time code to authorize each payment instead of a credit card number.
But NFC mobile phone payment solutions require some user effort to set up, and the payment experience can be complicated. Here is where further innovation is needed. For consumers, familiarity will lead to acceptance, but only after the process is streamlined will widespread use occur.
Seems to me that challenge is that it’s relatively “easy” to create a new payment mechanism like Apple Pay. But the problem isn’t building the charges into the phone—there are far more serious challenges.
There’s the infrastructure challenge. Even retailers who “accept Apple Pay” don’t have checkout counters that work with Apple Pay. My sense is that we still have a few years ahead of us before the structure will be in place at those who have embraced it early. And years more before it’s ubiquitous.
Then there’s a cultural shift required. Consumers have to (a) care; (b) trust this new method of payment; (c) feel there’s a benefit to them and (d) actually begin using it whenever possible. That will take time (but we’ll get there).
AND, while this is happening, we have to remember that the retail outlets are now mounting efforts to start taking credit cards with chips. I just received my first debit card with a chip. And…in three months of use I’ve found one local pet food store which is activated for the chip. No one. NO ONE else can accept it for chip based payment. It’s really just still the same old credit card—but it has a fancy looking chip in the front.
I believe this will all come together at some point, so I don’t think it’s “failing.” It simply isn’t living up to the hype.