MasterCard is establishing a foundation for mobile wallets in Europe by requiring the continent's merchants to accept contactless payments by the end of the decade.
The Purchase, N.Y.-based card network said that all new point of sale terminals deployed starting Jan. 1 2016 must enable "tap and pay" transactions. By Jan. 1, 2020, all terminals must accept contactless payments. The card network expects most of the migration to happen organically.
"The timeframe was designed to try to fit with normal terminal depreciation time scales, and to make sure that merchants and acquirers are choosing devices that can support [chip, mag stripe and mobile]," said Chris Kangas, head of contactless payments in Europe for MasterCard.
In 2013, the number of MasterCard and Maestro contactless payments in Europe tripled, Kangas said, suggesting a fast uptake among consumers.
"The driving factor in all of this is the rise of mobile payments that leverage [Near Field Communication] technology," Kangas said. "We want to make sure consumers can leverage their mobile devices to tap and pay wherever they go."
Contactless transactions are already becoming a norm across Europe, said Zil Bareisis, a senior analyst at Celent.
"Currently most are done via contactless cards, but there is a clear expectation that mobile payments will grow as well," Bareisis said.
MasterCard has set other migration timeframesin the U.S., it joined with the other card networks in mandating most companies adopt EMV-chip payments by October 2015 (gas stations have an extra two years). Many merchants may miss these deadlines (the penalty is a shift in fraud liability), but the initiative also serves as a path to adopt contactless payments in the U.S.
"The U.S. has an opportunity to install both EMV contact and contactless terminal at the same time," Bareisis said. "European merchants have already gone through EMV migration, so for them this is a new upgrade. MasterCard clearly recognizes this, and the timelines should accommodate natural replacement cycles for most merchants."
Kangas did not say what consequences European merchants would face if they did not meet the 2020 contactless deadline.
"MasterCard has all sorts of franchise rules and policies that we publish, and we expect issuers and acquirers to adopt those policies as part of being in our franchise," he said, adding MasterCard does take extenuating circumstances into consideration.
Kangas also would not address similar contactless migration deadlines outside of Europe. "I can't speak for our colleagues in other regions, but contactless has become a major force in many countries around the world," he said. MasterCard supports contactless payments in 66 countries, he said.
The MasterCard European contactless migration timeframe focuses on NFC as an underlying technology since NFC-equipped terminals would also be able to accommodate other enabling mobile payment technology, Kangas said.
It's likely that MasterCard timed its announcement to coincide with Apple's reveal of its Apple Pay platform, which relies on NFC, said Mary Monahan, an executive vice president and research director at Javelin Strategy & Research.
"We are seeing the first effects of the Apple announcementempowerment. MasterCard felt empowered enough to mandate that all point-of-sale devices get ready for contactless," she said. "In the U.S., this would likely cause a merchant revolt right into the court system, so MasterCard started in Europe, where the sting of EMV is farther in the past."
MasterCard's move also sends a signal to U.S. merchants to adopt dual-interface terminals when adding EMV acceptance, Monahan said. "Mandates, whether by government or card brands, so far seem to be the only way to create universal payment acceptance," she said.