One Year after EMV, What’s the Reality of Payments in the U.S.?

Talking about payments nowadays, and chances are you’ll hear a lot about Apple Pay, or the larger world of mobile payments or whether those six startups that let you pay with emojis have taken off. In other words, you’re probably hearing a lot about the future of payments, and not much about its present state.

To be fair, that might be because the current state of payments, especially here in the States, is a good deal less exciting. Despite reports to the contrary, cards are now perhaps the biggest method of payment across the globe; Mastercard, Visa and even Discover are still the best-known brands in payments, with Discover recently overtaking the other two as the most widely accepted card scheme globally for merchants, according to a new study by RBR.

Discover more widely accepted globally than Visa? How’s that again?

It’s due to Discover’s partnership with Union Pay and the acceptance that goes along with that in China, where Union Pay is universally accepted. Discover is accepted now at 42 million merchant outlets, slightly exceeding Visa and Mastercard (both at about 40 million) in terms of merchant acceptance.

Clearly, people are still loyal to their card brands—though according to RBR Senior Associate Chris Herbert, alternative payments are starting to make their mark. What kind of alternative payment just depends on where you are.

“There’s very little use case in Europe for mobile payments,” says Herbert, adding that Apple and Android Pay launched “quite a lot later” in Europe, making U.S customers more likely to use mobile payments while those in Europe seem to prefer contactless. “Contactless cards are growing quickly; [Europeans] are far more familiar with using contactless cards; much happier to use them in retailers.”

While Apple and Android Pay took a while to make their way across the pond, here in the U.S. we’re just about to pass our one-year mark for EMV adoption on October 1 — stop laughing, Europe.  EMV has been accepted in Europe for quite a while longer and has presented unique challenges in the U.S.

Just think about how many awkward interactions you’ve had in stores since the switch—craning your neck to see if there’s tape over the chip reader, sticking the card in and watching as the machine inevitably flickers and errors out, making equally exhausted eye contact with the cashier as you ask “so, do I swipe, or?”

After discussing how contactless is going to revitalize the entire transportation industry, for instance, those experiences are probably something you want to forget about—but as recent data collected from Mastercard suggests, greater adoption of EMV payments is actually driving progress on adopting alternative forms of payment.

According to Aikat, as of this July, 88% of Mastercard U.S. cards have chips, which represents a 105% increase in chip card adoption since the 2015 shift. There are two million chip-active merchant locations on Mastercard’s network alone, a figure which represents a 468% increase in chip terminal adoption since 2015.

Recent data according to Visa states that on its network, there are now 1.46 million chip enabled businesses, with the company having issued 363 million Visa chip-enabled cards.

“The migration to chip technology is about driving fraud out of our ecosystem, and establishing a technological platform for the next generation of payments including cards, contactless, mobile, and remote payments,” said Chiro Aikat, senior vice present of product delivery, EMV, for Mastercard. “The evolution to chip technology will not happen overnight, but as issuers, merchants, and consumers learn about and adopt this new payment technology they will begin to see the benefits of a safer, more convenient shopping experience.”

Both Herbert and Aikat admit that the U.S. payment market won’t change as quickly as some would like it—Aikat pointis out that the U.S. is “one of the most complex markets in the world” but both believe that the shift to alternative payments is something that’s coming, and Mastercard data supports the conclusion that better EMV acceptance rates—for both merchants and consumers—would be a good first step in that direction.

We’re getting there—according to the Mastercard survey of U.S. consumers (the company surveyed over 1,000 people, says Aikat), nine out of ten Americans “commonly use chip cards.”

“Chip card technology is also serving as a base for securing the online world as well as securing in-store payments,” said Aiket of the impact the technology is having on payments. “In the U.S., the continued migration from magnetic stripe cards to EMV is instrumental in upgrading the safety of the electronic payments infrastructure, as well as improving the overall foundation to allow for the next generation of products and services.”

To learn more about payments, join us at Bank Innovation Israel in Tel Aviv on Nov. 1-3. Register here

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