Why Kroger finally said yes to NFC

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It took years for NFC payments to gather momentum in the U.S., with merchants initially dragging their heels to enable contactless technology at payment terminals and banks waiting until 2018 to begin the slow rollout of NFC-enabled cards.

But coronavirus has created a compelling case for contactless payments' more hygienic approach to checking out in stores, making it tougher for merchants to continue resisting NFC.

The latest to reverse course is Kroger Co., which recently announced an NFC pilot at its QFC chain of 61 stores in the state of Washington, where it’s accepting Apple Pay and Google Pay for the first time.

Kroger was one of the last large merchants—along with Walmart—still blocking NFC at checkouts in favor of promoting its own Kroger Pay QR code-based shopping-and-payments app. Kroger Pay rolled out last year as part of Kroger’s omnichannel shopping strategy to link online and in-store purchases.CVS was another laggard that waited until late 2018 to adopt NFC, while Walgreens, McDonald’s and several other national retailers have supported NFC at their stores for almost six years.

But coronavirus forced Kroger’s hand in a couple of ways. Kroger’s Scan, Bag & Go app supporting in-store self-checkout, which is linked to Kroger Pay, was suspended in March because it proved too difficult to keep the keypads sanitized on the optional hand-held scanners stores provided.

Promoting Kroger Pay alone as a contactless checkout option was an uphill task, because there was no longer an easy way to connect an in-store shopping journey to in-app checkout via Scan, Bag & Go.

Second, a growing number of consumers are insisting on contactless options. A Visa survey released this month suggested almost half, or 48%, of consumers would avoid shopping at a store that only offers payment methods requiring contact with a cashier or using a payment device other customers share.

“What a difference a pandemic makes,” said Richard Crone, a principal with Crone Consulting LLC. “Kroger had to discontinue their store-provided hand-held scanners because they are a virus transmission point, and customers are veering away from any payment approach that’s not contactless.”

Kroger officials were not available to comment on whether the chain will enable NFC system-wide, but Crone thinks it’s inevitable.

“I believe Kroger is treating this like a lot of Silicon Valley moves, where it’s characterized as a pilot while they prepare a national rollout,” Crone said.

Kroger’s reluctance to support NFC stretches back several years. Kroger was a core member along with Walmart in the retail coalition MCX, which in 2012 began work on a shared app called CurrentC championing proprietary payment methods. A pilot of that method launched in 2015 and ended the following year.

Five years ago Walmart introduced its own in-store payment app, Walmart Pay, which has significant awareness with shoppers thanks to millions of dollars spent promoting it alongside Walmart.com.

Walmart also tweaked Walmart Pay's technology during the first month of the pandemic, streamlining the process so consumers could complete payment without touching the store payment terminal.

Within the Walmart Pay app for in-store and online sales, Walmart continues to eschew acceptance of Apple Pay, confining payment options to a credit or debit card, a gift card, or Chase Pay.

Walmart has not signaled plans to add NFC acceptance.

“Walmart Pay is well established and it functions as a contactless checkout option in stores,” Crone said.

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Contactless payments NFC Kroger Walmart MCX Merchant