More than a decade after U.S. payment card issuers endured the spectacular failure of contactless cards, some issuers wonder if it’s time to try again.
There’s also plenty of resistance to the idea of revisiting contactless now, when mobile payments are struggling to gain a foothold and there’s still much work to do in equipping consumers with basic chip-enabled credit and debit cards following the Oct. 1, 2015 U.S. EMV liability shift.
But some experts say there’s a competitive opportunity for issuers who re-introduce contactless cards, and sooner rather than later.
“It’s a question of when, not if, issuers re-embrace the idea of contactless cards in the U.S.,” said Oliver Manahan, vice president of emerging payments for MasterCard.
Manahan predicts the “tap-and-pay” approach of contactless EMV card could be a crucial bridge technology to eliminate the slowdowns many merchants and consumers are complaining of at the point of sale from contact-only EMV cards. The re-introduction of contactless cards also could nudge along mobile payments adoption.
“Contactless card technology provides the path needed for the behavioral change required for consumers to start tapping phones and using wearables to pay,” Manahan said.
MasterCard research suggests that while mobile payment volumes are rising, the vast majority of face-to-face transactions still involve plastic cards. This trend is observed in Europe, Australia and parts of Asia, where contactless cards are becoming de rigueur, speeding the checkout at restaurants, shops and in mass-transit environments. Contactless card technology also played a key role in helping to shift more transactions from cash to cards in those countries, Monahan noted.
Not everyone is looking all the way to contactless to speed up the time it takes to process basic EMV cards. Visa recently announced availability of an alternative process, called Quick Chip, that could streamline the time an EMV cards needs to sit inside a terminals to process.
And there’s an alternative line of thinking that suggests if mobile payments adoption suddenly accelerates, it could leapfrog the need for contactless cards.
Still, one card manufacturer said it’s getting “interest and inquiries” for the first time in years from U.S. issuers about contactless cards.
“There’s nothing we can say publicly about which issuers are looking at this, but I can tell you we’re having conversations with issuers about how contactless cards could speed up transactions at the point of sale, and what’s the next step for that,” said Troy Bernard, director of EMV and emerging products at Littleton, Colo.-based CPI Card Group.
Analysts anticipate significant caution from issuers—and some merchants—around the idea of when the right moment will come for re-introducing contactless cards during the somewhat sluggish U.S. shift to EMV.
“Following on the rough EMV rollout, and mobile pay’s difficulties so far, I think there would be a lot of deep thinking and sharpening of pencils before anyone moves forward on issuing contactless EMV cards right away,” said Marianne Berry, a managing director at Auriemma Consulting.
Randy Vanderhoof, director of the EMV Migration Forum, said contactless EMV cards are coming, but not immediately.
“The timing isn’t right yet, as banks try to get their first generation EMV cards out as quickly as possible and with the least cost and complexity, and merchants focus on getting EMV right,” Vanderhoof said.
Adding contactless cards to the mix too soon “could result in the same problems issuers faced during the first iteration of contactless cards more than ten years ago,” he warned.
Millions were spent on the ill-fated attempt by issuers to ignite contactless card payment beginning in 2005.
JPMorgan Chase & Co. had Blink, Discover Financial Services called its contactless technology Zip, Visa dubbed its approach payWave, MasterCard went with PayPass and American Express Co. came up with ExpressPay. None of those models caught on widely in the U.S. because of a dearth of merchants with NFC-enabled payment terminals, leaving a bitter taste for many issuers and industry participants.
The experience was particularly frustrating because rumors persisted year after year that NFC-based mobile payments were just around the corner, giving life to the idea that merchants would soon support contactless card payments.
But the same year that Google Wallet launched its NFC-based mobile payments concept in 2011, Chase finally closed the door on Blink, its contactless concept.
Ironically, now that U.S. issuers are approaching the latter stages of the massive task of issuing 1.2 billion basic contact-chip EMV cards, the merchant environment has never been riper for contactless card reception.
Since the October 2014 launch of the NFC-based Apple Pay mobile wallet—followed less than a year later by the launches of Android Pay and Samsung Pay—an estimated 1 million U.S. merchant locations have switched NFC technology on, enabling both mobile and contactless card payments.
Yet contactless cards are once again a scarce commodity in consumers’ wallets.
Vanderhoof predicts most issuers will wait until a critical mass of EMV cards in the first wave issued last year expires—in two to three years—issuers will likely lean toward broad issuance of contactless cards.