Consumers have been using their credit cards differently at some cash registers over the past month.
Stores are increasingly reading the card’s microchip rather than the magnetic strip. That’s part of an industry-wide push for greater credit card security.
Several major US payment networks shifted the responsibility for fraudulent charges onto the merchant instead of the card company if the merchant did not use the more secure pin-and-chip – or EMV – technology.
What consumers might not have realised is that the liability shift is likely to push credit cards out of vogue while galvanizing the push behind mobile payments, according to a November 16 Morgan Stanley note.
“EMV cards take 15 seconds to process. That’s up from two seconds for a mag stripe swipe. What about ApplePay readers? That is micro-seconds,” the Morgan Stanley analysts said. “Watch for mobile payments to take off as retailers turn on NFC to enable mobile wallet payments and encourage you to use your phone to pay.”
Mobile payments aren’t very popular now. Just one in five people in the US with a phone that works with Apple Pay has even tried to use the function, according to Trustev, a fraud prevention company.
But that’s also partially because credit cards are so effective that Apple Pay doesn’t seem to offer anything new, Trustev’s chief marking officer Rurik Bradbury told Tech Insider.
But as more and more merchants begin to read the chip rather than the magnetic strip, consumers might find dipping their credit cards cumbersome and time consuming.
Hand in hand
Although serveral big merchants including Panera, Duane Reade, and Sephora take mobile payments, 87% of small businesses had not adopted the technology by May, according to a study by Can Capital.
But that could change as more and more merchants begin to switch over to chip readers to avoid liability for fraudulent charges. That is because many pin-and-chip readers double up as mobile payment readers.
“We expect that the Europay, MasterCard, and Visa upgrade cycle will help fix the problem as a majority of EMV terminals being shipped are also NFC capable,” analysts wrote.
That means platforms such as Apple Pay will have something to gain from the liability shift — though it could take a while to show up. Just a third of merchants are now using chip-and-pin technology, according to an October 30 article from Time.
JPMorgan, which recently launched their own mobile pay platform, Chase Pay, could be another winner.
“The message is clear. Banks are fighting hard to keep their dominant position in payments,” the Morgan Stanley analysts wrote.
“It could take a long time, but these changes could be potentially disruptive to companies that have taken more risk to build movile real time payments like industry leader PayPal.”
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