Money in Motion: How Mobile Payments Technology Is Changing the Face of Retail
Payments and mobile technology in Europe have always been ahead of the American market. I am not sure when the idea started that the US is better known for adopting technologies at an early stage: stateside mobile networks are about 10 years behind those of Europe – and their payment methods also lag those of the “Old World” by a decade, too.
US society still seems to be largely cash-based. Compare that with Europe, where today 6 out of 7 transactions are made using a card. But the difference goes even deeper. The technocrat government of Italy, in particular, has declared a war on cash: Prime Minister Mario Monti wants the country’s vast army of self-employed entrepreneurs, including landlords, plumbers, electricians and small businesses to stop making large transactions in cash, which critics say simply facilitates tax evasion. On 4 December 2011, the Italian government reduced the maximum limit for cash payment from 2,500 euros to 1,000 euros. The rationale for this reduced limit on movements of cash is that Italy desperately needs to increase its tax revenues and views its anti-cash measures as a means of cracking down on tax evasion, which “costs” the government an estimated €150 billion annually. However, with an eye-watering €1.9 trillion of public debt to its name, some commentators have described this kind of punitive measure as “too little too late”.
Against the backdrop of a general tendency towards the “cashless society”, the recent announcement by American Express that they have just released their roadmap for Europay MasterCard Visa (EMV) got me thinking about the state of the payments environment and how this technology could develop in the coming months and years.
Now, let me stick my neck out and say that I for one didn’t actually think the US should have made the switch over to EMV, since it has been used in Europe for the past six years and the technology itself – at over 10 years old – is well past its sell-by date. It would have made much more sense for the US to bypass EMV altogether and move straight to near field communication (NFC), which allows consumers to make electronic payments by simply waving their NFC-enabled phone near a payments terminal. Yes, EMV has security benefits, and it has helped to substantially decrease fraudulent transactions throughout Europe, but this should have been apparent to the US retailers and federal authorities 6 years ago. Why wait until now when more flexible and innovative technologies have superseded it?
One saving grace is that at least this switchover will force merchants to upgrade their terminals. Each of these upgraded system devices will also accept NFC and mobile transactions, which is a fantastic opportunity for companies operating in this space, especially startups and smaller, independent companies who (unlike the credit card giants) do not have the funds or capacity to influence terminal and Point of Sale (POS) technology or upgrades.