The US has long lagged behind other countries in its adoption of chip-enabled credit cards (also known as EMV cards). With a mere 37% of US businesses able to accept these EMV cards, regulators are getting ready to crack the whip on slow-moving retailers.
Maybe they shouldn’t bother.
After all, given how painfully slow EMV cards are proving to be, a growing number of consumers are opting to dump their cards altogether in favor of Apple Pay, Android Pay, and other smartphone-based payment systems. But Apple, more than any other company, benefits from the agonizingly slow chip-and-dip delays at the checkout counter.
It’s not about the fraud
EMV cards are more secure and are meant to reduce fraud. Consumers should care, but ultimately convenience is what drives consumer decisions, and EMV cards are anything but.
If you’ve tried to use a chip-enabled credit card, you know what I mean. First you hand it to the cashier to swipe your card, only to be told, “Your card has a chip, so just insert it into the reader and wait.” And wait. And wait. Last night I tried to buy something and it took 20 to 30 seconds to complete the transaction, something that would have taken a simple swipe with my old, chip-less card. A first-world problem, sure, but a problem nonetheless.
Some, like Jeff Hughes, a software developer for a large bank, argue that EMV cards don’t actually take longer than old-school cards: “[T]his is just the perception…because the new cards must be left in the machine until the transaction is finished. Previously after doing a magnetic swipe you were done and could put the card back in your wallet/purse/etc.”
That might be true, but it will be small consolation to those of us being made to wait, especially when Apple Pay is instantaneous.
Apple Pay just got a lot more convenient
Yes, Apple Pay. Apple’s smartphone payment system got off to a slow start, in part because of poor merchant penetration but also because it wasn’t clear that pulling out a phone to pay was any faster than pulling out a credit card.
That was then. This is now.
As I’ve written, Touch ID makes Apple Pay incredibly efficient. In just a few months, I’ve gone from defaulting to my credit card 99% of the time to defaulting to Apple Pay 100% of the time. When a merchant doesn’t support Apple Pay, I get frustrated, especially if they impose on me the dreaded chip reader. Nothing says “I don’t want your business” like a glacial point-of-sale experience, which is what chip readers deliver.
Apparently I’m not alone in ditching my credit cards (chip-enabled or otherwise) for Apple Pay. As Apple CEO Tim Cook noted on Apple’s Q1 2016 earnings call:
Consumers have spent billions of dollars with Apple Pay. In the second half of 2015, we saw a significant acceleration in usage, with a growth rate 10 times higher than in the first half of the year. There are now over 5 million contactless payment ready locations in the countries where Apple Pay is live today and it’s soon to be accepted at thousands of Exxon and Mobil branded stations across the U.S. via their Speedpass+ app.
Some survey data suggests Apple Pay growth is slowing, but that’s not what Cook is reporting. “A growth rate 10 times higher than in the first half [of 2015]” sounds like significant acceleration, not deceleration.
A bright future for Apple Pay
Again, part of the reason for Apple Pay’s rise comes down to EMV cards. Even as Apple Pay makes shopping more convenient, EMV cards make it less so. Given the choice, expect to see consumers dump their cards as fast as merchants allow by upgrading their terminals.
Mobile payments are expected to top $700 billion within two years and, according to Bank of America estimates, will rise to $3 trillion by 2022. A significant share of that will go to Apple because Apple, unlike EMV cards, is actually making it easier to shop, not harder.