Despite all the excitement over the launch of Apple Pay last year and Google's recent launch of Android Pay, the fact remains that many stores still can't accept payment via smartphones and won't for a long time to come, judging from the results of a new survey of U.S. merchants by The Strawhecker Group, a management consultant in payments. Only 27% of them will be ready by Oct. 1 to accept new credit and debit cards with security chips in them.
That's the deadline payment processors such as Europay, MasterCard and Visa (known by the acronym EMV) set after which merchants will be liable for fraudulent transactions from credit cards. EMV cards are more secure than more commonly used magnetic-stripe cards.
That 27% is down noticeably from 34% in March. And that's a problem for mobile wallet companies such as Apple and Google, which were hoping that the Oct. 1 deadline would prompt quick replacement of checkout terminals with new ones that can accept not only the chip cards but also contactless mobile payments from phones. Now, it looks once again like the mobile wallet revolution will have to wait awhile longer.
The two companies are counting on Apple Pay and Android Pay to grease e-commerce in apps and in stores, provide an added incentive to buy new phones, and open new marketing and advertising opportunities inside stores. "We're in lap one of a marathon when it comes to mobile payments in the store," Jared Drieling, business intelligence manager at TSG, said in an interview.
Several obstacles are in the way of greater adoption of the new terminals, according to the survey, mostly involving issues around terminal installation and training. "The first time I used my EMV card, it took 10 minutes to get through checkout," Drieling said.
Also, some merchants such as restaurants that don't have all that much fraud have little incentive to replace terminals to accept the new cards or mobile wallets. Not least, many customers in the U.S. have only recently gotten the cards and don't know how to use them yet.
Still, the terminal replacement process is gradually moving along. By December, some 44% of U.S. merchants are expected to adopt EMV, though it will take until 2017 to reach 90%.
The problem is with smaller merchants and not large retailers, most of which have replaced their terminals. If you mostly shop at big-box stores and eat at restaurant chains, you're good to go. Tim Cook on Apple's third fiscal quarter conference call in July did say that Apple Pay is adding 80,000 small and midsized businesses a month. And payment processors that cater to small businesses are offering inexpensive terminals, such as Square's $49 wireless reader.
For more details, here's a not entirely self-serving infographic on EMV adoption from TSG:
