This is an excerpt from The Future of Payments Technology, a whitepaper by former ShopKeep President and co-CEO, Norm Merritt. You can access the full whitepaper here.
The payments industry is known for embracing the world of obscure jargon with gusto, so it’s no surprise to hear that the latest buzzword, ‘re-terminalization’ is enjoying widespread adoption. This monument to obfuscation is now joining ‘chargeback’, ‘interchange’, ‘net settlement’, and others in a list of terms that seem expressly designed to confuse the average merchant.
The fact that this term badly needs a rebranding, however, shouldn’t detract from the momentous change and opportunity that awaits the payments industry in 2015. Re-terminalization refers to the process of businesses replacing their existing point of sale system with new technology and America is about to see a bigger wave of change than we’ve seen in many decades.
The cause of this change can be found in the burgeoning adoption of two payment technologies, EMV (EuroPay, MasterCard, Visa) and NFC (Near Field Communication). The interesting thing is that neither of these technologies are really new. In fact, while America has been slow on the uptake, EMV has been widely adopted across the globe for almost a decade and NFC has been ‘on the cusp’ of revolutionizing payments for years. Nevertheless, both of these technologies are almost certainly going to enjoy widespread adoption over the coming year.
So, What’s at the Root of this Sudden Interest in EMV/NFC?
Unless you’ve been living under a rock for the last few months, by now you’ve heard that Apple has launched its very own payments product, Apple Pay. All new iPhone 6 and iPhone 6 Plus models are shipping with an NFC-enabled chip that allows consumers to pay with their phone by simply tapping on an NFC-enabled reader. Several companies, including Silicon Valley ubergiant Google, have tried and failed to stimulate adoption of NFC technology, and yet analysts are predicting far greater results this time around.
This is partly due to Apple’s perceived unique ability to shift consumer behavior; it’s partly down to their proactive approach enlisting big-box retailers prelaunch; and it’s partly a product of their collaborative approach to payment processors. All of this, however, still doesn’t completely address the key reason U.S. merchants will finally embrace NFC this year: timing. Apple Pay is hitting the market at a time when EMV chip card acceptance is a hot and pressing topic.
Recent point of sale security breaches at Home Depot, Supervalu, and Target have brought to the front pages something that has been a quietly acknowledged industry secret for some time: America is the weak link of credit card fraud and is long overdue for a major payment security upgrade. The United States currently accounts for more than 50% of the world’s credit card fraud despite only processing 25% of card the world’s transactions. It’s that simple fact that has led EuroPay, Mastercard and Visa to finally call time on the card swipe and usher in an era of the EMV ‘chip cards.