While the standard cash, credit and debit cards are still accepted, payments via mobile phone are becoming more common. It’s convenient for consumers, but behind the scenes questions about customer data, security and fees are being raised by consumer advocates and companies alike.
For retailers, the biggest issue is with transaction feeds. Each time a credit or debit card is used at a retail location, the retailer has to pay a fee in order to have the payment processed. Merchants spent approximately $71.7 billion in the last year on these fees, according to the Nilson Report. However, mobile payments using EMV technology could reduce those fees significantly.
What is EMV? EMV (Europay, MasterCard and Visa) uses an embedded chip in the cards that is considered to be safer and more reliable than magnetic strip technology. In addition, it carries lower fees than traditional payment processing options.
EMV is widely used in Europe, but is slowly being embraced in the U.S. Target, for example, is committed to transitioning their branded credit and debit cards to EMV technology within the next year. MasterCard and Visa are also pushing the technology by establishing new rules that would limit fraud liability for retailers who continue to use the older magnetic strips.
However, the transition to mobile payments is not going to be a rapid one. EMV technology still uses cards, but other forms of mobile payment just require the consumer to send a message from their phone while at the checkout stand.
A difficult transition for some. This transition to a new form of payment could be hard for consumers who are used to pulling out their wallets to pay. In addition, banks and payment processers aren’t so eager to embrace the lower transaction fees. If mobile payments and cashless consumers become the standard, they could be losing out on millions of potential fees.