Put EMV (EuroPay, Mastercard and Visa) migration near the top of the list of factors that could spur NFC adoption among US merchants. VDC has been actively communicating why we believe non-payment NFC applications, such as smart marketing, loyalty and couponing will drive merchants’ NFC adoption and that contactless payments will follow. Speaking strictly in the context of NFC applications, our views on this topic remain unchanged. During our visit last week to Cartes North America in Las Vegas, however, we validated our belief that EMV migration represents another potential catalyst for merchants’ NFC adoption.
EMV, short for EuroPay, Mastercard and Visa (also commonly known as “chip and pin”) is the payment card standard used across most of the world, with the major exception being the US, where magnetic stripe cards are dominant. However, in an effort to curb fraud, both MasterCard and Visa have issued merchant migration directives that mandate support of EMV in the US. These directives are presented as “roadmaps” comprised of a series of milestone deadlines, with the first looming on the horizon in April 2013. After the final October 2015 deadline, non-compliant merchants will be held liable for any fraudulent mag-stripe transactions processed by their business. For many merchants, we think this potential liability will be a powerful motivator that spurs investment in EMV-capable payment infrastructure, most notably payment terminals.
How will migration to EMV-compliant infrastructure facilitate NFC adoption? VDC believes that merchants upgrading their payment acceptance solutions to achieve EMV compliance are highly likely to “future-proof” their solutions to the greatest extent possible in order to avoid any foreseeable upgrades or refreshes, which will result in NFC readiness (if not capability) being included in the solution specifications. Although merchants might not actually utilize NFC functionality until several years from now, the incremental cost of adding this capability will be justifiable for most enterprises if it means avoiding another solution upgrade in the short term.
For payment solution suppliers like Verifone and Ingenico, the upcoming migration to EMV technology in the US presents a great opportunity to drive NFC adoption/readiness via education and “future-proofing” messaging. Respondents to VDC’s 2011 NFC Enterprise End User Survey cited “lack of awareness/understanding” as one of the top barriers inhibiting enterprise NFC adoption, with the need for information being particularly acute among lower-tier, less technologically-sophisticated enterprises. Payment terminal suppliers and channel organizations, take note: it’s time to prepare your NFC lesson plans.