This is page 2 of:

ISIS Delay Points Out Mobile Payments Problem: No Leadership

September 19th, 2012

That’s not about to change without some real leadership. And it won’t come from any of the current offerings. Google and PayPal can’t move the needle. Apple and ISIS are afraid to try.

And it remains true that the only players in mobile payments who could make mobile payments work are big chains, whose finance guys have decided that their desire to dump interchange fees will magically overcome their own infighting and technical naïveté. Um, right.

Don’t forget, there was a time (several business plans ago) when ISIS, too, was going to do without Visa, MasterCard and interchange. The chains didn’t jump on board. Now ISIS is tied up with the card brands, just like the other big mobile-payment schemes.

Can anyone pull this situation out of the fire? Sure—big chains can, if they can make interchange relief a long-term goal instead of a first-rev requirement.

Starbucks has already shown that customers will use their phones to pay, so long as it gets them through the line faster. In France, McDonald’s has pushed the model a little farther forward by giving mobile users their own lane at the counter.

Those aren’t unique situations. Most retailers can figure out ways to get mobile-payment customers through the checkout ordeal faster, even it it’s just mimicking McDonald’s France and designating a special “mobile express” lane. That would require a little traffic-flow work and a lot of promotion, including an enthusiastic push from store managers and associates. Then again, it would be a lot cheaper than self-checkout was—no expensive new machines, just a dedicated lane.

Chains can make mobile payments happen by giving customers who use it a benefit: faster out the door. That means they really do control whether mobile payments can get any traction.

It also means the chains that jump in first will have real leverage with whatever mobile-payments schemes they’re feeding transactions to. Once they get that transaction stream going, those chains will have real power over Google, PayPal, Apple or ISIS because the chain could turn off the transaction stream with the flip of a switch. (That type of cutoff wouldn’t even have to irritate customers much—they could still use their phones to pay, the phones would just mimic contactless cards.)

And once those chains have sold mobile payments to customers—and convinced mobile-payments providers that the chains are in the driver’s seat—it would become much easier for a mobile-payment effort to try a non-Visa/MasterCard offering that, say, debited funds from a bank account directly instead of using a branded debit card. That would finally cut out the card brands’ interchange fee, delivering the relief that chains crave.

Even if it just provided competition to Visa and MasterCard, interchange-free payments would provide the first real competition to the card brands’ model in decades. It’s clear from the recent legal settlement that going to court isn’t going to put effective pressure on the card brands. That will have to come from a competitive threat. Without that, Visa and MasterCard have no reason to negotiate, much less deliver interchange relief.

But it can’t happen until someone gets mobile payments working—actually delivering transactions—first. And if chains don’t provide the leadership, who can?


Comments are closed.


StorefrontBacktalk delivers the latest retail technology news & analysis. Join more than 60,000 retail IT leaders who subscribe to our free weekly email. Sign up today!

Most Recent Comments

Why Did Gonzales Hackers Like European Cards So Much Better?

I am still unclear about the core point here-- why higher value of European cards. Supply and demand, yes, makes sense. But the fact that the cards were chip and pin (EMV) should make them less valuable because that demonstrably reduces the ability to use them fraudulently. Did the author mean that the chip and pin cards could be used in a country where EMV is not implemented--the US--and this mis-match make it easier to us them since the issuing banks may not have as robust anti-fraud controls as non-EMV banks because they assumed EMV would do the fraud prevention for them Read more...
Two possible reasons that I can think of and have seen in the past - 1) Cards issued by European banks when used online cross border don't usually support AVS checks. So, when a European card is used with a billing address that's in the US, an ecom merchant wouldn't necessarily know that the shipping zip code doesn't match the billing code. 2) Also, in offline chip countries the card determines whether or not a transaction is approved, not the issuer. In my experience, European issuers haven't developed the same checks on authorization requests as US issuers. So, these cards might be more valuable because they are more likely to get approved. Read more...
A smart card slot in terminals doesn't mean there is a reader or that the reader is activated. Then, activated reader or not, the U.S. processors don't have apps certified or ready to load into those terminals to accept and process smart card transactions just yet. Don't get your card(t) before the terminal (horse). Read more...
The marketplace does speak. More fraud capacity translates to higher value for the stolen data. Because nearly 100% of all US transactions are authorized online in real time, we have less fraud regardless of whether the card is Magstripe only or chip and PIn. Hence, $10 prices for US cards vs $25 for the European counterparts. Read more...
@David True. The European cards have both an EMV chip AND a mag stripe. Europeans may generally use the chip for their transactions, but the insecure stripe remains vulnerable to skimming, whether it be from a false front on an ATM or a dishonest waiter with a handheld skimmer. If their stripe is skimmed, the track data can still be cloned and used fraudulently in the United States. If European banks only detect fraud from 9-5 GMT, that might explain why American criminals prefer them over American bank issued cards, who have fraud detection in place 24x7. Read more...

Our apologies. Due to legal and security copyright issues, we can't facilitate the printing of Premium Content. If you absolutely need a hard copy, please contact customer service.