Cellum Insights

How EMV’s pain could be mobile payments’ gain

After a delay lasting several long years, last month retailers in the US finally came face-to-face with a deadline for adopting chip-and-PIN, or EMV, cards.

As expected, the new mandate from credit card companies has resulted in a fair amount of grumbling by merchants, who have had to adopt new point-of-sale (POS) terminals and internal processing systems, and comply with new rules on liability. (After the October 1 deadline, liability for fraud in “card present” transactions will shift to the party that is least EMV compliant, meaning in most cases merchants.) And there have been horror stories about EMV cards simply not working.

The rollout has also led to complaints by consumers, many of whom seem to find using these “chip-and-dip” cards inherently less convenient than traditional magnetic strip cards, despite the enhanced security offered by the new technology.

emv-terminalThis is in part due to the fact that, unlike in much of the world, a large percentage of retailers in the US long ago shifted to POS terminals that allow shoppers rather than tellers do the swiping/dipping. And not only is the “dipping” motion more cumbersome and time-consuming than swiping, the authorization process for chip-and-PIN transactions often takes much longer than for non-EMV cards. Meanwhile, many American shoppers have developed a habit of swiping their cards in advance of bagging their groceries or otherwise before the transaction has been fully completed, and then returning to the POS terminal to quickly sign on the sale. EMV cards make such time-saving “swipe ahead” practices impossible.

Though the time lost to EMV cards may only amount to seconds per transaction, these seconds add up quickly for both consumers and merchants. This is especially true for “big box” and other larger retailers which treat “time-in-line” as a key metric, some of which reportedly added new cash lines in anticipation of the delays caused by the changeover to EMV. And note that these “lost” seconds are likely to be very noticeable for many consumers, who have been forced to give up a convenience they already adjusted to.

Because of this, it is possible that the introduction of EMV in the US could offer a significant boost to the adoption of mobile payments in the world’s largest retail and tech market. This possibility was noted well before the October deadline by a vice president of Gartner Research among others, and can be anecdotally confirmed at almost any retail outlet now making the switch to EMV. As one salesperson at a small “mom and pop” retailer near New York City told a Cellum researcher last week, “I never thought my customers would see using their phone to pay as a convenience, and to date we’ve only had a few regulars who use Apple Pay or Google Wallet and Android Pay. But now with these new cards I expect many to give it a try. The two things our customers have in common is that they all are busy, and they all have phones.”