Confusion but hope as US faces payment revolution

In six months, new card regulations could usher in greater acceptance of Apple Pay and its competitors

In just under six months, a behind-the-scenes switch in the payments industry will change the way U.S. consumers shop and could bring wider acceptance for Apple Pay and its competitors.

Beginning in October, liability for transactions with fraudulent credit and debit cards will shift from the card companies to retailers, if the retailers haven't invested in terminals that don't accept chip-based cards. The chip cards are already being sent from banks to customers, and some stores have them in place, but much is still up in the air.

At this week's Transact 15 expo in San Francisco, a gathering of companies in the electronic payments industry, everyone has questions and there are few answers. Could the shift be delayed, will banks mandate PIN numbers instead of signatures for purchases with the new cards, and will cybercriminals just shift their attention online?

The switch to chip-based cards happened a decade ago in many European countries and is now common around the world, but the U.S., with its complex financial and retail system, has lagged. No one had wanted to put the investment into new cards and new terminals.

And then Target happened.

The breach of Target's payment system last year, which exposed the card numbers of tens of millions of consumers, is credited by many as the final push the industry needed to finally make the switch.

The new chip cards add a digital signature to transactions that lets the payment network know that the card being presented is the official one and not a fake -- magnetic stripes don't have this ability and have proved vulnerable to copying.

But to accept the cards, retailers have to upgrade their payment terminals.

The largest retailers in the nation are already well prepared, said Rod Hometh, senior vice president of strategic development at Ingenico, a credit card machine retailer. They've been preparing for the last two years and even large regional retailers are expected to be ready at or near the deadline, he said, but most small businesses are well behind.

This is partly due to cost and partly to lack of awareness of the shift.

With a small handheld terminal costing about the same as a smartphone, upgrading can cost thousands of dollars for small businesses, and there are many such businesses in the county.

Of the 6 million retail terminals in the U.S., a million of them account for 95 percent of all transactions. Small retailers make up the remaining 5 million terminals.

Some retailers are taking the opportunity to upgrade their entire systems to benefit from new technology and software that has been introduced in recent years, said Kevin Colaco, innovation mentor at Retail Cloud, a California start-up that offers a free point-of-sale system with premium add-ons.

An advantage of this approach is that the new terminals also include readers for NFC [near-field communication] systems like Apple Pay, Google Wallet and Samsung Pay.

For consumers eager to adopt mobile payments, the switch could bring wider acceptance. But the new cards are also expected to bring some confusion. In most countries, chip cards also ushered in an era where PINs, rather than signatures, are used to verify a transaction. Many banks and retailers are expected to stick with signatures, but some automated terminals such as gas pumps might start requiring PINs.

With six months to go, card issuers appear resolute on the October 1 deadline and most people involved agree that a further delay would cause a loss of faith in the switchover.

Martyn Williams covers mobile telecoms, Silicon Valley and general technology breaking news for The IDG News Service. Follow Martyn on Twitter at @martyn_williams. Martyn's e-mail address is martyn_williams@idg.com

Join the Good Gear Guide newsletter!

Error: Please check your email address.

Tags IngenicoAppleretailvisaRod Homethfinanceretail cloudindustry verticalsKevin Colaco

Our Back to Business guide highlights the best products for you to boost your productivity at home, on the road, at the office, or in the classroom.

Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.

Martyn Williams

IDG News Service
Show Comments

Essentials

Lexar® JumpDrive® S57 USB 3.0 flash drive

Learn more >

Microsoft L5V-00027 Sculpt Ergonomic Keyboard Desktop

Learn more >

Mobile

Lexar® JumpDrive® S45 USB 3.0 flash drive 

Learn more >

Exec

Audio-Technica ATH-ANC70 Noise Cancelling Headphones

Learn more >

Lexar® JumpDrive® C20c USB Type-C flash drive 

Learn more >

Lexar® Professional 1800x microSDHC™/microSDXC™ UHS-II cards 

Learn more >

HD Pan/Tilt Wi-Fi Camera with Night Vision NC450

Learn more >

Budget

Back To Business Guide

Click for more ›

Most Popular Reviews

Latest News Articles

Resources

PCW Evaluation Team

Azadeh Williams

HP OfficeJet Pro 8730

A smarter way to print for busy small business owners, combining speedy printing with scanning and copying, making it easier to produce high quality documents and images at a touch of a button.

Andrew Grant

HP OfficeJet Pro 8730

I've had a multifunction printer in the office going on 10 years now. It was a neat bit of kit back in the day -- print, copy, scan, fax -- when printing over WiFi felt a bit like magic. It’s seen better days though and an upgrade’s well overdue. This HP OfficeJet Pro 8730 looks like it ticks all the same boxes: print, copy, scan, and fax. (Really? Does anyone fax anything any more? I guess it's good to know the facility’s there, just in case.) Printing over WiFi is more-or- less standard these days.

Ed Dawson

HP OfficeJet Pro 8730

As a freelance writer who is always on the go, I like my technology to be both efficient and effective so I can do my job well. The HP OfficeJet Pro 8730 Inkjet Printer ticks all the boxes in terms of form factor, performance and user interface.

Michael Hargreaves

Windows 10 for Business / Dell XPS 13

I’d happily recommend this touchscreen laptop and Windows 10 as a great way to get serious work done at a desk or on the road.

Aysha Strobbe

Windows 10 / HP Spectre x360

Ultimately, I think the Windows 10 environment is excellent for me as it caters for so many different uses. The inclusion of the Xbox app is also great for when you need some downtime too!

Mark Escubio

Windows 10 / Lenovo Yoga 910

For me, the Xbox Play Anywhere is a great new feature as it allows you to play your current Xbox games with higher resolutions and better graphics without forking out extra cash for another copy. Although available titles are still scarce, but I’m sure it will grow in time.

Featured Content

Latest Jobs

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?