EMV contains a key that unlocks contactless payments
EMV's adoption numbers tell just one side of the story. There are still some concerns when it comes to the user experience impacting EMV adoption as consumers are still adjusting to the perceived slower transaction speeds from chip readers.
At the start of the year, Visa reported “chip-enabled merchants now account for 46% of the company’s in-store payment volume.” It also saw upward of “800 million chip-on-chip transactions in November,” a 359% increase year over year.
Considering the strides that the EMV industry has taken to improve both the retailer and customer experience, you might look at this as a win-win for the U.S. market.
As with any type of behavioral change, it takes time for consumers to adjust to a different process, but eventually come to realize that the change can be a positive one.
EMV is still a high priority with some exceptions. Even with higher charge-back rates, we're still seeing merchants adopt EMV tech, as they can benefit from its offerings. That said, those who rely only on internal EMV solutions lag behind, and there is still a huge amount of knowledge they have to gain to accept EMV-based transactions.
So with that in mind, what's next? Where can EMV go to revolutionize the experience for merchants and customers?
I believe the next evolution of EMV is going to be contactless. While introduced in 2005, its success in the U.S. has not been stellar, for two main reasons. Adoption rates were limited as mobile payments were used infrequently, and many POS terminals did not have contactless payments. In addition, many consumers saw little value as they felt transactions weren't any faster or more secure than swiping.
With the increase in chip card usage, many consumers felt the pains of "dip-and-wait" transactions. Contactless payments today, seem to address the slowness of EMV contact, without compromising security, and unbeknownst to many, uses the same security protocol (known as "dual interface"), transmitted through two types of interfaces.
We're seeing a slowing of adoption rates for chip cards, though they've been on the rise since the previous quarter, with 1.75 million Visa merchants now accepting, and over 1 million since last November.
However, while many may see this as a sign that EMV isn't likely to be successful in the U.S., I see this as an indicator that there may be a significant shift from chip transactions to contactless payments. However, we'll still see EMV figures continue to rise, as more merchants see the benefits they can reap from fraud protection. As Javelin reports, we should at least expect a third of U.S. retail establishments to accept contactless cards by 2019.
Look at the international landscape. The volume of contactless payments has grown significantly over the past five years. In fact, many countries are issuing government mandates for contactless payments, and by 2020 almost every merchant will be accepting them. This includes contactless cards, Apple Pay, Android Pay, iWallet and Samsung Pay among others. And with it, there's going to be a huge change for consumers and merchants.
Just take a look at how contactless payments has transformed London's transport system, one of the largest city infrastructures in the world. For years, riders had to either queue up to purchase a ticket every time they traveled, or outlay a significant up-front cost to buy a travelcard. But with the introduction of Oyster, the time was reduced significantly, allowing people to load it onto a credit card and pay as they go. Since September 2014, more than 450 million trips have used Oyster, making that 30% of all journeys around London. This continues to grow, with 25,000 new cards being used on the network every day; with the introduction of other mobile payments, we're only going to see further growth.
With that in mind, it only makes sense that EMV is heading in the direction of contactless payments. Think of what could happen if this technology flourished in other industries such as retail, restaurants and health care. While the advantages are there, the perception for change is running at a snail's pace. As soon as we see merchants jump on the RFID train, it'll certainly be bringing another wave of change for EMV as well.