Chip Cards, Contactless and Big Macs
The adoption of smart card technology in North America is beset by a “chicken and egg” conundrum. To accept smart cards would require merchants to retool their card reading equipment even though the swiping of the magnetic stripe currently serves them well. Here is one way to get merchants to adopt smart card technology:
Provide an economic incentive. Mastercard announced today that McDonald’s Restaurants of Canada will begin to roll out chip card terminals in some of its 1400 restaurants. Their point-of-sale terminals will be MasterCard chip enabled and PayPass compatible:
The PayPass system is designed to enable small-ticket purchases to be completed quickly, securely, and easily. Customers simply tap a PayPass-enabled MasterCard card on a PayPass reader to complete a transaction. A PayPass transaction is faster than paying by cash and designed for busy merchant environments like quick-service restaurants, concessions stands, and drive-thrus.
Source: Finextra
Customers will have the option of using the contactless PayPass method or to insert their card into the chip-enabled terminal and enter a PIN number to complete the transaction.
Clearly, speeding up transaction time is an incentive for a place like McDonald’s to invest in smart card technology at the point-of-sale as speed is a crucial component of their business. What economic incentives exist for other merchants where speed is not such a factor?
Great blog. I read it regularly. The problem with contactless is that the payment schemes are promoting the technology purely as a way to speed up transactions, which is not nearly enough to get merchants excited. There are very few contactless cards out there, and at the same time a perfectly reasonable solution exists with mag stripe cards, simply by eliminating the need for a signature for small value purchases. Maybe not quite as fast as contactless, but very close, and it works on all cards out there. The real benefit of contactless is to allow merchants to use data in the card to improve their business activities, something much more difficult to do with magstripe.