Whether plastic chip cards or mobile apps or Bitcoins, the landscape for payments at retailers' point-of-sale—wherever it may be—is going to look vastly different in the near-term future. But it's not happening yet.
Back in January, Apple CEO Tim Cook declared 2015 "the year of Apple Pay." At mid-year, that prediction looks way too optimistic, but the business world is definitely talking about payments and consumers are starting to listen.
As a Gallup Panel Web study found, only 2 percent of Americans are actually using digital wallets. That's a tiny number compared to the publicity new payment systems are getting, but it would be a mistake to expect it to stay so low. It would also be a mistake to expect rapid growth by one form of payment or another.
For example, both Apple Pay and the upcoming Samsung Pay can only be used on those companies' latest devices. That eliminates a lot of potential customers. The recent shift in the way people acquire phones will also prolong the mobile payment systems' rollout. Some people want the latest and greatest, but for most, knowing that they have bought their handheld device for upwards of $600 will cause them to hold onto them a year or two after they finish paying. The old "free" phone and hidden fee scam is hopefully dead and buried, thank you T-Mobile.
Then there's Merchant Customer Exchange's CurrentC, backed by many larger retailers, including Walmart, Target and Best Buy. The retailers hope CurrentC will help them avoid card fees and shoppers will link the app to checking accounts or store-brand credit cards (like Target's). But most of these chains have also indicated they will accept Apple Pay and, most likely, any other payment system that shoppers' embrace. Meanwhile, consumers love their credit cards, so CurrentC is likely going to be a tough sell.
There have been many other developments in payments, such as Costco shifting from American Express to Visa, getting a break on the interchange fees in the deal. And Sam's Club changed from Discover to MasterCard. There are cards that offer biometric activation and others that combine all of a consumer's cards into one. In social media, Facebook has enabled peer-to-peer payments with its Messenger app. And more retailers are starting to consider cross-border payments for online orders to expand their sales.
One new payment technology that will unquestionably take off sooner than later is EMV chip cards, mainly because the big card networks are going to send them to all their customers. People want these cards because they are more secure, but they could be even better if the card companies and banks went with chip-and-PIN authentication rather than the chip-and-signature. Retailers are calling for this, and so is the Federal Reserve. Did you ever wonder if how you sign those wobbly terminals makes a difference? Watch this YouTube video then think again. Chip-and-PIN is clearly the way to go.
Retailers are also upset with the card networks' insistence on the October fraud liability shift deadline. That's when companies that have not invested and implemented EMV point-of-sale equipment and systems will risk bearing the liability for credit or debit card fraud, unless the card issuer in the transaction is less prepared. Although the deadline should be pushed back to allow more retailers to catch up, it looks like the card issuers aren't going to let that happen. I'll let you know if that changes.
Customers want the new options for making payments at retail stores—93 percent of retailers said so in an ACI Worldwide survey. And as slow as it is growing right now, that is a persuasive argument to any merchant.
Could it be that this is "the year of payments"? I'll stop short of Tim Cook's hyperbole and just say this is certainly the year of payments awareness. Acceptance and widespread use will follow. Bank on it. – Dan