Getting m-POS ready for EMV in the US

Getting m-POS ready for EMV in the US
As we highlighted in our recent report The Update on EMV Migration in the US: Leaving the Station and Building up Steam, the US market is finally making a strong progress towards EMV. While many of the barriers we discussed in the past have been dismantled, there are still challenges that remain. One such challenge is the upgrade to m-POS platforms. Square has created an entirely new market a few years ago with a simple ‘dongle’ that a merchant could connect to his smartphone’s or tablet’s headphone socket and start accepting cards. The customer would swipe the card, sign on the phone and that would be it. Now Square and its many competitors have to bring out new devices that support EMV cards. That also means a change for merchants, and they will have options. Square announced its new device in November last year. Unlike most of m-POS solutions in Europe, it will not support chip and PIN, but will be a standalone chip card reader and will support signature as the cardholder verification method. It will start shipping in spring, but will not be free – merchants will have to pay $29 for the mobile chip card reader and $39 for the accessory to Square Stand. Earlier this month PayPal Here also announced that it will be bringing its EMV reader already available in the UK and other markets to the US. And in addition to iOS and Android, it will support Microsoft Surface Pro 3, and other devices running Windows 8.1. First Data’s Clover has launched Clover Mobile, a mobile and EMV compatible version of its Clover m-POS platform. Unlike Square’s readers, Clover Mobile also supports NFC transactions, including Apple Pay. And then there is Poynt, launched at last year’s Money2020. Poynt is described as “a future-proof device that accepts magnetic stripe, EMV, NFC, Bluetooth and QR code payment technologies. You are ready to accept your customers’ favorite payment methods: Apple Pay, chip-and-pin, mobile apps, and whatever else the future brings.” Of course, there are other options, above solutions are just a few examples. The challenge for merchants is deciding if and when to upgrade the readers and whether to stick with their existing provider. As always, risk-based assessment will be key. For example, whenever I am in Vegas, I try to visit a small shop that sells vinyl records, which accepts card payments via Square. If I were the owner, I would look to upgrade to an EMV reader as soon as possible – while it’s not a coffee shop in terms of frequency of transactions, most payments are tens and hundreds of dollars. On the other hand, a local dry cleaner who already knows most of its customers will be less compelled to upgrade. Clearly, not everyone will be ready by the liability shift deadline in October, but merchants with the risky profile should make sure they are.

Looking Eastwards for Payments Opportunities

Looking Eastwards for Payments Opportunities
Last week I published a new report called “Retail Payments Market in Japan: A Land of Contrasts and Opportunity” – an overview aimed primarily at those seeking to get an introduction to payments in Japan. Our clients know that we don’t publish country-specific reports that often; instead, we tend to focus on themes and topics that have relevance in multiple markets. However, I had the opportunity to take a closer look at the Japanese retail payments market as part of a consulting engagement last year. Given how different and interesting the market is, I couldn’t resist the temptation to share the findings with our clients. It really is a land of contrasts. Despite Japan’s deserved reputation as an advanced payments market, it remains a cash-heavy society. Credit cards are popular, although the numbers have remained flat in recent years. On the other hand, transactions on debit cards are virtually non-existent. Credit cards are issued by a broad range of companies, not just banks, and most serve as both issuers and acquirers. The e-commerce market is large and fast growing, and it has a number of unique payment methods, such as konbini. Japan is often presented as an advanced case of mobile contactless payments, but those have been based on a proprietary standard (Sony Felica) and only now the country is starting to migrate to NFC payments. The report explores all these and other trends in much more detail. It’s also a land of opportunities. Based on our analysis, we see opportunities falling into three categories with different risk and investment profiles:
  1. A mobile app with sophisticated capabilities for cardholders to manage their cards and engage with their finances should be a “no regret” move for nearly all issuers.
  2. Some opportunities require a clear business case decision. Examples include card-based money transfer services, m-POS services, and targeted offers, coupons and rewards.
  3. Finally, Japanese issuers and their partners should make careful decisions where to place their bets and what kind of business model to pursue in mobile payments, as those opportunities represent relatively high investment and risk.
Japan is a mature payments market and may be overshadowed by the growth of China, India and other emerging markets, but it certainly represents opportunities for players both inside and outside the country.

Top Five Themes at Money2020

Top Five Themes at Money2020
I am finally starting to catch up on things back after the intense week at Money2020. Congratulations to the Money2020 team for pulling off another impressive event! With 4,000 people attending, the energy and excitement was palpable. With opportunities to network and so many sessions going in parallel, I only got a chance to attend a fraction of what was on offer. Having had a bit of time to reflect, here are my personal top 5 takeaways: 1. Digital wallets are starting to come of age. With interesting announcements from PayPal, Isis and a number of other players, it is clear that now everyone agrees that it’s not about the underlying technology (e.g. NFC vs QR codes), but about customer and merchant adoption, which requires clear benefits, simplicity, and ubiquity. My view is that of the leading contenders (PayPal, Isis, Google, scheme wallets), PayPal is showing the most promise today. It’s concept of checking-in is simple to understand, the check-out does not depend on a specific technology (the code can be scanned or entered) and last year’s deal with Discover gives PayPal ubiquity, at least in the US. 2. MCX is more real than many people think. The panel of merchants representing the MCX initiative received a mixed reception from the attendees. However, they did say more than they have ever done in the past and where they didn’t say too much, it was possible “to read between the lines.” Two of the most common questions to MCX are 1) how will they attract consumers? and 2) are they building a new payments network? For #1, MCX is looking to leverage the relationships they already have with millions of customers through their loyalty programs and private label cards. And if the offer is compelling, who is to say the customer won’t be tempted to download the app and give it a try? Those same private label cards will also be a starting point as a funding source, although MCX are also believed to be in discussions with banks to connect directly to the bank accounts, and through FIS they have a technology partner capable of helping them navigate the technical complexities. As Wal-Mart representative concluded, “do not confuse the lack of announcements [from MCX] with a lack of progress.” 3. Tokenization is going to be a big topic over the coming years. On October 1, Visa, MasterCard and American Express introduced “a proposed framework for a new global standard to enhance the security of digital payments and simplify the purchasing experience when shopping on a mobile phone, tablet, personal computer or other smart device.” A card number would be replaced by a token, which would be used instead for shopping online or on a mobile. The US banks have already started a similar effort via The Clearing House, and in my view, the announcement from the three networks is a direct response to those efforts and an attempt to influence the developments. Despite multiple panel discussions at Money2020, not many details are available at this stage how all this will work, but it’s obvious that it is a trend to watch. 4. Card-linked offers remain exciting while entering the next stage of development. Events like Money2020 are great at bringing the entire ecosystem together: issuers, payment providers, merchants, investors, analysts and others. Card-linked offers and transaction-driven marketing continue to excite different parties with their promise and the event had a number of intelligent panel discussions, acknowledging the fact that no one party has full access to the necessary data and recognizing the need to collaborate creatively while respecting customer privacy. I had the privilege of moderating one such panel discussion among the representatives from Affinity Solutions, Home Depot, Speedeon and Vantiv – thank you to all my panelists and to the organizers for giving us the opportunity. As a further sign of maturity, Cardlinx Association announced at Money2020 brings together companies such as Microsoft, Bank of America, Discover, Facebook and First Data in addition to most of the main platform players to tackle industry-wide issues such as stacked offers (e.g. multiple offers presented through different channels), product returns and others. 5. The emphasis in ‘m-POS’ is shifting from ‘m-‘ to ‘POS.’ Square and others have pioneered the m-POS concept where a mobile device and a ‘dongle’ are acting as a payment terminal to accept the card. However, the development of digital technologies has paved the way for providers of new breed of POS systems, which are aimed at replacing traditional stationary cash registers/ POS systems. The new systems, such as Clover announced by First Data at Money2020, are cloud-based open platforms enabling to tap into the developer community for a wide range of apps that can help merchants manage their inventory, reconcile books or engage with customers. Combined with sleek hardware, they offer much more than simple payments acceptance and are likely to appeal to a broad range of merchants. I am sure I haven’t mentioned everything that was worth mentioning (for example, Peter Diamandis’ opening keynote was truly inspiring). If you attended the event and would like to add your observations, please leave a comment to this post.