Continuing from my earlier post “Mobile Payments: Is Your Bank Putting Its Best Foot Forward?” on how disruptive innovations in mobile communications technology are transforming the payments
landscape, I would now like to draw attention to recent developments that are likely to have a significant impact on the adoption of mobile payments technologies.
Leading payments systems such as Visa, MasterCard and Discover have recently announced the liability shift dates for adoption of EMV (Europay MasterCard Visa)-capable POS terminals for countries that are still to adopt the technology (http://en.wikipedia.org/wiki/EMV)
This essentially means that after the cut-off date, which is, for instance, mandated as October 2015 for the US by Visa and MasterCard, the liability for any fraudulent transactions occurring on POS terminals that are not EMV-capable will rest solely on the
merchant and not on the bank. The liability shifts are already in place in European countries and many countries in the Middle East and Africa. The obvious and direct implication of this development is that merchants across these countries will be forced to
adopt EMV-enabled POS terminals. An implicit fallout will be the impact this will have on the mobile payments landscape.
The future of mobile payments is going to be heavily influenced by the near field communications (NFC) technology, as I had discussed in my previous post. As merchants and retailers upgrade their POS terminals to support chip-based cards, a logical extension
will be the introduction of NFC-based contactless payments support. Since NFC-based transactions use the standard ISO/IEC 14443 communication protocol currently used by EMV, merchants will not need to incur significant additional costs for NFC adoption at
the point of sale. Also, since the payment flow in any NFC-based transaction is governed by the contactless EMV specifications, merchants and financial institutions will not face significant hurdles related to compliance and security. Hence, we can safely
assume that EMV adoption will encourage NFC adoption as well. Soon enough, as the liability shift dates for EMV-adoption for ATM transactions draw nearer, we are likely to witness the mushrooming of NFC-enabled ATMs as well. Banks will need to enhance software
to enable support for contactless cards and NFC devices.
However, there is still the issue of customer ownership that I raised in my earlier post “Mobile Payments: Is Your Bank Putting Its Best Foot Forward?”. There is still considerable ambiguity
regarding the control of the secure element among mobile hardware vendors, platform vendors, operators and payment gateways. There is still no standardization on who will own and streamline it.
For banks, the present scenario can be perceived as an opportunity as well as a threat. The opportunity exists in the increasing acceptance of mobile payments while the ownership conundrum poses a threat. Admittedly, banks have not been the first movers
as far as mobile contactless payments are concerned. Non-traditional players such as mobile service providers have taken a lead. However, it’s still not too late for banks to garner a foothold. They need to utilize the complementary technologies of EMV and
NFC to deliver a comprehensive payments ecosystem that offers customers the dual benefits of increased security and convenience.
I would love to your views and take this discussion forward, so please put forward your perspectives and opinions.