Menu
Confusion but hope as US faces payment revolution

Confusion but hope as US faces payment revolution

In six months, new card regulations could usher in greater acceptance of Apple Pay and its competitors

In just under six months, a behind-the-scenes switch in the payments industry will change the way U.S. consumers shop and could bring wider acceptance for Apple Pay and its competitors.

Beginning in October, liability for transactions with fraudulent credit and debit cards will shift from the card companies to retailers, if the retailers haven't invested in terminals that don't accept chip-based cards. The chip cards are already being sent from banks to customers, and some stores have them in place, but much is still up in the air.

At this week's Transact 15 expo in San Francisco, a gathering of companies in the electronic payments industry, everyone has questions and there are few answers. Could the shift be delayed, will banks mandate PIN numbers instead of signatures for purchases with the new cards, and will cybercriminals just shift their attention online?

The switch to chip-based cards happened a decade ago in many European countries and is now common around the world, but the U.S., with its complex financial and retail system, has lagged. No one had wanted to put the investment into new cards and new terminals.

And then Target happened.

The breach of Target's payment system last year, which exposed the card numbers of tens of millions of consumers, is credited by many as the final push the industry needed to finally make the switch.

The new chip cards add a digital signature to transactions that lets the payment network know that the card being presented is the official one and not a fake -- magnetic stripes don't have this ability and have proved vulnerable to copying.

But to accept the cards, retailers have to upgrade their payment terminals.

The largest retailers in the nation are already well prepared, said Rod Hometh, senior vice president of strategic development at Ingenico, a credit card machine retailer. They've been preparing for the last two years and even large regional retailers are expected to be ready at or near the deadline, he said, but most small businesses are well behind.

This is partly due to cost and partly to lack of awareness of the shift.

With a small handheld terminal costing about the same as a smartphone, upgrading can cost thousands of dollars for small businesses, and there are many such businesses in the county.

Of the 6 million retail terminals in the U.S., a million of them account for 95 percent of all transactions. Small retailers make up the remaining 5 million terminals.

Some retailers are taking the opportunity to upgrade their entire systems to benefit from new technology and software that has been introduced in recent years, said Kevin Colaco, innovation mentor at Retail Cloud, a California start-up that offers a free point-of-sale system with premium add-ons.

An advantage of this approach is that the new terminals also include readers for NFC [near-field communication] systems like Apple Pay, Google Wallet and Samsung Pay.

For consumers eager to adopt mobile payments, the switch could bring wider acceptance. But the new cards are also expected to bring some confusion. In most countries, chip cards also ushered in an era where PINs, rather than signatures, are used to verify a transaction. Many banks and retailers are expected to stick with signatures, but some automated terminals such as gas pumps might start requiring PINs.

With six months to go, card issuers appear resolute on the October 1 deadline and most people involved agree that a further delay would cause a loss of faith in the switchover.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

Follow Us

Join the New Zealand Reseller News newsletter!

Error: Please check your email address.

Tags IngenicoAppleretailvisaRod Homethfinanceretail cloudindustry verticalsKevin Colaco

Slideshows

Top 50 defining moments of the New Zealand channel in 2016

Top 50 defining moments of the New Zealand channel in 2016

Reseller News looks back on a tumultuous 12 months for the New Zealand channel, assessing the fallout from a year of sizeable industry change. Whether it be local or global mergers and acquisitions, distribution deals or job changes, the channel that started the year differs somewhat to the one set to finish it - Reseller News assesses the key moments that made 2016.​

Top 50 defining moments of the New Zealand channel in 2016
​Hewlett Packard Enterprise honours high achieving NZ channel

​Hewlett Packard Enterprise honours high achieving NZ channel

Hewlett Packard Enterprise honoured its top performing Kiwi partners at the second running of its HPE Partner Awards in New Zealand, held at a glitzy ceremony in Auckland. Recognising excellence across eight categories - from distributors to resellers - the tech giant celebrated its first year as a standalone company, following its official split from HP in 2015.

​Hewlett Packard Enterprise honours high achieving NZ channel
Nutanix treats channel partners to Christmas cruise

Nutanix treats channel partners to Christmas cruise

Nutanix recently took to the seas for a Christmas Cruise around Sydney Harbour with its Australia and New Zealand staff, customers and partners to celebrate a stellar year for the vendor. With the sun out, they were all smiles and mingled over drinks and food.

Nutanix treats channel partners to Christmas cruise
Show Comments