EVG Adoption Isn’t the Only Payment Tech the US Lags Behind

Despite the US innovations in the technology and financial markets, American payment technology lags behind that used in other countries. The roll out of EMV chip cards here is still incomplete; although the deadline for conversion was last year, many merchants either don’t have terminals with chip readers or haven’t enabled them, requiring consumers to swipe rather than dip their cards. Even when fully implemented, the US version of chip cards is chip-and-signature, rather than the more secure chip-and-pin commonly used abroad.

That’s not the only payment technology where other countries are ahead of us in adoption. Contactless payment cards are very limited in use in the US, but widely used abroad. Only a small fraction of POS terminals in the US support the near field communications (NFC) technology required for contactless payments. This has limited the acceptance of mobile payments as well and is why Samsung Pay uses a different technology that existing magnetic card readers understand.

In the UK, where NFC technology is widespread, the number of contactless payments increased 228 percent last December and now amounts to 12 percent of all card transactions. Merchants and consumers like the ability to use the cards to speed payment for small purchases, such as bus and subway fares, that previously would have been paid for in cash.

As the roll out of EMV-enabled POS terminals continues, many of those newer terminals will also support contactless payments, potentially increasing the use of contactless cards and mobile contactless payments within the US.

Zombie Cards and Other Security Concerns

The cards incorporate security measures such as encryption and authentication codes; the card is never out of the owner’s hands. Although the cards don’t require a PIN for each transaction, PINs are required after a number of transactions or when a financial limit is reached. Despite this, as with all payment technology, there are concerns about security.

• Incorrect card charged or duplicate charges. If a wallet has more than one contactless card, it’s possible the wrong card will be charged. It’s also possible for there to be duplicate charges or other charges when a purchase wasn’t intended.

• Charges allowed on cards that were canceled. For smaller amounts, banks don’t always check payments in real-time, but treat them as offline transactions to be verified later. As a result, payments can be accepted even on cards that were canceled after being reported lost or stolen.

• Information on cards can be easily stolen. Because the cards are meant to be read at a distance, criminals with appropriate card reader technology can read them at a distance as well. Some suggest using a RFID-blocking wallet, or even wrapping the cards in foil, to prevent this theft.

Should We Expect Growth in US Contactless Payments?

Because there have been so few contactless terminals in the US, customers haven’t gotten into the habit of trying to pay with contactless cards or contactless mobile. Now that the new EMV-enabled terminals also support NFC, these contactless payments are likely to increase. Customers who discover how fast contactless payments are compared to the slow EMV chip readers are likely to prefer them. Because so few US consumers have contactless cards, those contactless payments are likely to come from mobile phones.

One vendor reports 90 percent consumer satisfaction once they try NFC payments with their phones. Much of that satisfaction comes from the additional features offered by mobile wallets, such as loyalty rewards. Other consumers continue to have concerns, not only about security but also about practical issues such as how to pay when the phone’s battery runs out; if they still need to carry a card with them for that scenario, there’s less reason to use the phone for payment. The overall consumer response to these technology changes is still unfolding.