We regularly get questions at Wimsett & Company on how Apple Pay, Samsung Pay, Android Pay and various forms of mobile payment acceptance affect the payments industry. The answer is that these forms of payment are making it easier and more convenient for customers to pay as well as provide an opportunity for larger businesses (like Starbucks and Walmart) to market and engage more with their customers through their own customized mobile wallet app. Last year, 23% of smart-phone owners used an app for the first time to make a purchase, 12% used an app to order a taxi or car ride, 11% to make a restaurant reservation, and 8% to book airfares. Furthermore mobile banking use was up 70% from 2014 (Daly, 2016). With Lyft, Uber, and Taxi’s being the fastest growing category for mobile purchases, the market is quickly growing, allowing other services to obtain their space in the mobile payment sphere. For example, there have been reports that Ford is working on a mobile app where you will receive a reminder text and coupon to change your oil. You then are able to book your next oil change all in their app. Making payments a seamless part of the consumer experience is driving demand and consumer usage.
With the Europay, MaterCard, Visa (EMV) chip card liability shift in 2015 and the growing adoption of mobile payments Near Field Communication (NFC) technology, business owners find themselves being pushed by both the regulators and the card companies for higher security measures and by consumers for ease and convenience. In order to meet these demands, business owners have been upgrading their terminal or POS system to be able to accept both of these forms of payment. Once a business owner upgrades their terminal they need to make sure to turn on EMV and NFC functionality in order to accept these forms of payment.
EMV transactions do have a short lag time at the point of sale (with dial-up connection it can take up to 8-10 seconds). According to a Harbortouch survey of 5,000 consumers, 18.2% are concerned about this lag time (Woodward, 2016). With the extra lag time and the increase in mobile payments, many are predicting that mobile payments might eventually “leapfrog” EMV chip payments. Business owners are leery of anything that will slow down the purchase experience.
These are exciting times as the government and consumers play a more active role in driving more security and convenience in the payments industry. While these changes are improving payment acceptance, they are focused primarily around the terminal and POS. Therefore, it is estimated that ecommerce fraud will increase dramatically. Online purchases for the first three quarters in 2015 totaled $252 billion, up 13.2% from 2014. Fraud losses in North America over the past few years have held steady at 0.9%, but card not present fraud is estimated to total $6.4 billion by 2018 which is double the estimated $3.1 billion in 2015 (Lucas, 2016).
In order to combat this type of fraud it is predicted that biometrics such as; fingerprints, voice and facial recognition and behavioral analytics might begin playing a role in ecommerce security. One organization that is working on developing more biometric authentication is Fast Identity Online (FIDO) Alliance (Lucas, 2016). Not only will these organizations become increasingly important to help develop biometric software solutions to secure our information, but software solutions that conduct behavioral profiling. “Behavioral profiling can help card issuers reduce false positives between 40% and 60% (Lucas, 2016).”
The good news is that we were not the first country to adopt EMV and the mobile payments adoption has been gradual. Therefore, we are able to analyze the trends of other countries, strategize for more secure payments in the U.S., and develop software solutions to help prevent card present, mobile payment, and card not present fraud. It will be an exciting year in 2016 as we continue to develop advancements in the payments industry that will help provide more security and convenience.