Guest Post by Jessica Ellerm
US consumers and merchants are on the cusp of a dramatic shift in card acceptance behavior due to the introduction of EMV. However with a strong headwind of contactless and mobile payments heading retailers’ way, what does this mean for US merchants and consumers? We take a look at trends in the Australian payment space in order to understand more.
The EMV journey down-under
The famous EMV liability shift for credit cards was completed in Australia in April 2014, however the journey towards chip and PIN based authorisation began as early as 2003, with ANZ the first major Australian bank to follow the UK’s lead in issuance of chip based cards. Unlike most developed countries, the EMV migration in Australia was not driven by high card fraud rates. Instead, adopting EMV was seen largely as a preventative measure by the payment industry, hoping to avoid the fates of larger markets overseas.
In August 2014, the final piece of the EMV puzzle was completed, with signatures phased out at the point-of-sale altogether late last year. While highly disruptive for certain sectors (hospitality in particular) the anticipated anarchy never eventuated, suggesting retailers and consumers are far more adaptable than the schemes and issuing banks give them credit for.
Contactless now king
During the migration of EMV, payment technology did not stand still. In fact, chip and PIN based authorisation was (and continues to be) fast outstripped by contactless (NFC) technology, now embedded in nearly all cards issued. A report by the Reserve Bank of Australia, demonstrates that growth in contactless payments has been accompanied by a decline in the frequency of contact (i.e. chip and PIN) payments. Driven by a need for speed and convenience, contactless technology has been readily adopted by millennials. Australia now leads the world in contactless payments, with recent reports estimating 53 per cent of the population have made a contactless payment.
The mobile threat
It doesn’t stop there however. EMV in Australia has also started to be to be displaced by in-store mobile payments. While yet to still make their full weight felt, in-roads are being made into the payment space by tech giants. This year, the local arm of PayPal teamed up with independent acquirer Tyro Payments to introduce Tyro Mobile, a (nominally) terminal free way for retailers to accept payments direct from the PayPal app into their POS, with authorisation completed via face recognition. While potentially ahead of the consumer adoption curve, the technology signals a growing demand for terminal free payment solutions – from both consumers and retailers alike.
What next for the US?
So what does this all mean for merchants in the US? Well, many of them will no doubt be thinking very carefully about the POS hardware they choose to implement over the next couple of months. Upgrade costs will more than likely fall directly onto their shoulders, and smart chains will be attempting to future-proof as much as is possible in a fast paced payments world. They’ll be looking for EMV, contactless and mobile payments acceptance that potentially goes deeper than purely NFC, similar to the PayPal/Tyro solution.
They’ll also be looking to pass on costs. Deeply unpopular with Australian consumers, surcharging on goods has risen dramatically in Australia in the past 5 years.
Looking further down the value chain, sales for cloud based POS systems could also get a boost, with merchants looking for easily updateable systems with low capex and opex costs. In Australia, cloud based POS’s Vend and Kounta have seen significant growth, by offering deep payment integrations to multiple players, and not all terminal hardware based.
As other countries can attest to, EMV will only lead to small gains in fraud protection for merchants and consumers. With EMV old news for most of the rest of the world, the big story is where next. There is no doubt that technology adoption towards mobile and contactless will pick up considerable pace in the US thanks to Apple Pay, Square and Samsung Pay – ultimately, the big trend in payments is to make them as invisible as possible to the consumer. The question is, who will foot the bill?