The US payment market is vast and complex, with more than $5.6 trillion spent using the more than 1.5 billion credit, debit and private label cards issued to Americans. So it shouldn't be quite so surprising (or disheartening) that the EMV transition in the US has been uneven; the sheer size and scale of the US market has played a significant role in making the conversion particularly difficult.
While this fact doesn't excuse the disruption caused by the transition to chip cards, the complexity of the US market is an important consideration when comparing the rough start in the US with other countries' adoption of EMV over the past two decades.
No two markets are the same and each one has to contend with its own quirks, but there is much the US market can learn from other countries that have been down this road already. In many markets, card issuers, merchants and consumers are moving overwhelmingly to something better than the "chip and dip" cards Americans are being offered today. That something better is contactless cards, or "tap-and-pay."
Here are some notable examples:
- The UK market has seen an incredible growth in the adoption of contactless cards. In November 2016, consumers spent more than £2.9 billion ($3.6 billion) using them. That's a year-over-year increase of 154%. What's more, the previous November (2015) had a 238% increase compared to the previous year (2014). This while the total number of cards issued supporting tap-and-pay nearly doubled from 56.4 million cards to 101.8 million cards. Not only did total spend increase, the number of transactions in the two years between November 2014 and November 2016 increased from 39.9 million to 324.5 million—an increase greater than 700%. Even the average transaction amount increased in that period, from £7.59 ($9.45) to £8.95 ($11.14).
- Consumers down under appreciate the convenience of contactless as well. A study by Visa found that in January 2014, 40% of face-to-face transactions in Australia using a Visa card, or approximately 40 million transactions, were made with cards supporting tap-and-pay during the month. One year later, that number had jumped to 60% of face-to-face transactions using Visa cards, or 75 million transactions in January 2015. By April 2016, that number had reached 75% of face-to-face transactions and more than 127 million monthly transactions. In a little more than two years, the total number of transactions on contactless cards had more than tripled! (For its part, a Mastercard executive said 80% of its transactions in Australia use contactless cards.)
- Canadians too are quickly embracing contactless payments. In its annual report published in 2015, the Canadian Payment Authority estimated 650 billion transactions took place in 2014 using tap-and-pay. The next year, the CPA report estimated 1.1 billion contactless transactions, or approximately 12% of all debit and credit transactions. It's important to note the CPA counts contactless payments using a mobile device in its totals, but Visa reported tap-and-pay transactions using a card as a form factor went from 12.1% in June 2014 to 32.7% in June 2016.
These are only a few examples of markets where consumers are adopting contactless payments at a rapid rate. There are many more countries seeing adoption rates for contactless cards climb as well. The message from these markets is clear: when consumers have access to contactless cards, they use them.
And it's not hard to see why the technology has caught on. Tap and pay satisfies the criteria for what makes any new payment technology successful: they provide a simpler and easier experience for both sides of a transaction. Contactless cards offer consumers and merchants the added security of a chip-enabled card with a layer of convenience and speed that comes with tapping to pay. And the card is a familiar and easy-to-use form factor – the learning curve is a small one.
It would be easy to continue to make excuses for the US market's protracted transition to chip cards, to cite its size and scale as mitigating factors on why it was late in following the rest of the world to adopt chip cards. It might be understandable, but consumers in the US paid a price for that delay with higher fraud rates and inconvenience when traveling abroad. Wouldn’t' it be preferable this time if the US avoided another delay in following the rest of the world as they move to contactless cards?