With the EMV 2015 milestone approaching rapidly, there’s been renewed interest in smartcards, those credit cards with an embedded computer chip. Back in 1996 I was working for a vendor helping Visa introduce a stored-value smartcard to the US. Visa Cash was debuted at the 1996 Olympics in Atlanta, and I firmly believed it was the beginning of a cashless society. (I later worked on MasterCard’s system called Mondex, from the UK, which debuted the following year in Manhattan).
But since you don’t have a Visa Cash card in your wallet, it’s obvious the project never took off. It was convenient for consumers, faster for merchants, and more cost-effective for banks, so why did it fail? All emerging payment systems suffer from the chicken-and-egg dilemma. Consumers won’t carry the cards if few merchants accept them, and merchants won’t install the terminals if few consumers have cards.
Today’s emerging payment providers are in a similar pickle. There has to be enough value for all three constituents – consumers, merchants, banks – to change the status quo. And it’s not enough to exceed the value, it’s got to be a leap in value, because people generally resist change. ATMs and transit cards are great examples of this, and airline kiosks and self-checkout systems are to a lesser extent.
Although Google Wallet and ISIS, the two leading NFC payment platforms in the US, have shown strong commitment, there’s been very little traction. Yes, I can load my credit card number into my phone then tap to pay, but what was the incremental value over swiping my old card? For it to be a leap in value, it has to offer more than just payment, which I can do very easily today. The other two ingredients are thought to be loyalty programs and digital coupons, but neither Google nor ISIS really did them well.
Of course a large portion of the mobile phone market doesn’t even support NFC thanks to Apple, and since it’s not in their best interest that situation is unlikely to change. Another issue is getting access to the “secure element,” the chip inside the phone where accounts numbers can be held securely. Telco providers and handset manufacturers own that area, and they’re not willing to share with banks. (Host Card Emulation, which has been endorsed by MasterCard and Visa, might be a solution.)
Square recently gave up on its wallet, and MCX (the group of retailers trying to create a mobile payment platform) is very slow out of the gate. That leaves PayPal and a slew of smaller companies trying to introduce easier ways to pay.
But is it really so cumbersome to carry and swipe (soon to insert) a credit card? Aren’t there more important problems to solve in the retail customer experience? Maybe Apple will come up with some novel way to use iBeacons and fingerprint identification to make payments, but for now I think we need to focus on upgrading to Chip-and-PIN and tightening security. In the meantime, NFC payments will continue to struggle.
