Payment Paradigm Poised for Major Shift

Susan Nunziata, Director of Editorial | 1/4/2013 | 40 comments

Susan Nunziata
Depending on where you live in the world, you may have already encountered a range of new retail payment options, possibly with mixed results.

Now is the time to ask: Which of these systems will succeed, and what will they mean for retail IT? First, let's have a look at some of the technologies in play.

According to the UK's The Guardian, RFID payment technology is being widely used in credit card and mobile phone payment solutions in countries including Germany and Hong Kong, and in cities such as London.

Chip-and-PIN, known as EMV cards, contain embedded microprocessors and are being rolled out worldwide. According to the Smartcard Alliance:

    Eighty countries globally are in various stages of EMV chip migration, including Canada and countries in Europe, Latin America and Asia. According to EMVCo, approximately 1.5 billion EMV cards have been issued globally and 21.9 million POS terminals accept EMV cards as of the end of 2011. This represents 44.7% of the total payment cards in circulation and 76.4% of the POS terminals installed globally, excluding the United States. American Express, Discover, MasterCard and Visa have all announced their plans for moving to an EMV-based payments infrastructure in the U.S.

Then there's the mobile wallet concept in which your smartphone itself is used to complete transactions and process payments, holds all your loyalty card programs and coupons, and serves as your identification. For example, as we've previously reported, ING and MasterCard are trying a new system that involves registering your mobile phone number with your bank to authorize a purchase in a store by scanning a QR code.

As E2's sister publication Digital Canvas Retail notes in a recent report, the payment revolution won't happen in 2013, but this will be the year that retailers make the necessary changes to deliver on a new range of payment options.

As to which of these payment options will succeed, recent reports and polls give us some insight.

The Guardian raises security concerns about RFID payment solutions, noting that the security compromises requirement to make near field communication (NFC) and contactless payment easy for consumers opens the gateway to hackers. Likewise, some consumers who have used chip-and-pin cards, with their added security measures, have found the solution to be clunky, particularly when attempting online purchases.

When it comes to mobile payments and mobile wallets, consumer interest does not necessarily mean consumer uptake. For example, in the US, Harris Interactive polled 2,383 adults during November 2012 to get their views on mobile payments and mobile wallets. Two thirds of respondents (66 percent) believe that smartphones will eventually replace payment-card transactions. However, less than than one third of respondents (32 percent) believe this will happen in fewer than five years.

UK research firm ICM uncovered similar results in its survey of 2,015 consumers in Great Britain during November 2012. According to ICM, a third (34 percent) of respondents say they would "definitely or probably" use their mobile device as a wallet to make payments, as well as to collect coupons, to use as event tickets, and to use for access to public transportation.

As the solutions shake out, there are a number of steps CIOs and other IT leaders can take to prepare their retail infrastructure for payment changes:

  • Open lines of communication now with the executives in your organization charged with protecting both information security and physical security.
  • Likewise, get the discussions going with your chief marketing officer and your head of sales to talk about how these solutions can be used to maximize revenue and improve customer service.
  • Take inventory of your in-store payment processing systems as well as your wired and wireless networking infrastructure, looking for potential weaknesses.
  • Keep ahead of the curve and study up on the various solutions being considered or deployed worldwide, otherwise you run the risk of being left out of the strategy altogether.
  • Consider how these advanced systems, particularly the mobile wallet, will change the way your retail organization uses customer data. You'll be seeing demand increase for solutions that can analyze patterns and finely target individual consumers with personal offers via their mobile devices. Be ready with your ideas.

Which payment options would you most like to see succeed? And what additional advice do you have for retail IT to prepare for the new payment paradigm?

View Comments: Newest First | Oldest First | Threaded View
Page 1 / 4   >   >>
Susan Nunziata   Payment Paradigm Poised for Major Shift   1/11/2013 9:36:23 PM
Re: Mobile Wallets
@stotheco: Agreed the excerise of modeling potential security risks is always worthwhile. Expect the best, prepare for the worst. 
Susan Nunziata   Payment Paradigm Poised for Major Shift   1/11/2013 9:19:19 PM
Re: America? and debt collectors
@Umair, Thanks! Calling all E2 community: Is there a patent lawyer in the house?
Susan Nunziata   Payment Paradigm Poised for Major Shift   1/11/2013 12:08:39 AM
Re: America? and debt collectors
@Anand: I agree. This era of instant gratification is something that our grandparents would never have dreamed of. I know mine lived firmly within their means. Their philosophy was: "Use it up, wear it out, if you can't afford it, do without."
Anand   Payment Paradigm Poised for Major Shift   1/10/2013 11:23:44 PM
Re: America? and debt collectors
As the credit card itself encouraged generations of Americans to plunge into debt, the easier we make it to spend money the harder it will be for people to control their habits.

@Susan, that is precisely the reason I am not a big fan of credit cards. Credit cards encourages you to spend money which you dont have. I dont like buying something using loan. Best method to control our spending is avoid using credit cards.
Anand   Payment Paradigm Poised for Major Shift   1/10/2013 11:19:38 PM
Re: America? and debt collectors
I don't believe I am close-minded, but why try to change or fix something that isn't broken in the first place?

@Henrisha, interesting point. I think its not just limited to fixing the broken system but its about invention and making the payment process more optimal and user friendly.
eethtworkz   Payment Paradigm Poised for Major Shift   1/10/2013 11:14:36 AM
Re: America? and debt collectors

Responsible Lenders?If that is'nt an oxymoron I don't know what is!!

Umair Ahmed   Payment Paradigm Poised for Major Shift   1/8/2013 3:23:21 PM
Re: America? and debt collectors
I think you should patent that idea right now!

@  Susan :-) That's a nice suggestion. But I will need help and advices of E2 community to make it succeed :) E2 is my main source of inspiration and innovations update.
eethtworkz   Payment Paradigm Poised for Major Shift   1/8/2013 9:34:12 AM
Re: digital wallet the way to go

It has everything to do with Discipline.

You lack Discipline in one aspect of life;You lack it everywhere!!!
soozyg   Payment Paradigm Poised for Major Shift   1/8/2013 9:29:04 AM
Re: digital wallet the way to go
@Eathtworkz, I think there might even be a correlation between spending habits and weight. (People who are overweight tend to have worse--less controlled--spending habits?)
soozyg   Payment Paradigm Poised for Major Shift   1/8/2013 9:16:51 AM
Re: IT
@eethtworkz, so companies just have to make sure they don't base anything in the Android system! lol
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