Retailers Rank Security As Top Concern, While More Than One-Third Plan to Add NFC

Payments security is the top concern of retailers in 2015, finds a Boston Retail Partners report. This comes as retailers contend with increased scrutiny of their data-protection practices and a sweeping transformation of the U.S. payment card system.

In the survey of more than 500 retailers, 63% cited payment security as their top priority in 2015, besting other priorities such as having a unified commerce platform and updating their inventory systems.

Payments are a top concern for many retailers this year because of the debut of credit and debit chip cards using the Europay-MasterCard-Visa (EMV) standard. They need new equipment to accept the cards, which are dipped into the point-of-sale terminal instead of being swiped. Indeed, the survey found a 650% increase in the number of retailers supporting EMV transactions within the next year.

But it’s not just EMV that retailers are planning to adopt. Forty-five percent of them said they expect to add encryption services by October to help protect card data as it moves within their payment networks, with 40% planning to add tokenization by channel to mask the card data. Thirty-five percent plan to add near-field communications (NFC) support, and 23% plan a single tokenization scheme across all of their sales channels.

“Retailers are constantly trying to keep up with new technology, better secure their customer data, and maintain an edge on their competitors,” says Ryan Grogman, a vice president at Boston-based Boston Retail Partners, in an email to Digital Transactions News. “These reasons, along with recent data breaches at several high-profile retailers combined with the looming October 2015 liability shift, were what prompted many retailers to embark on payment-security projects over the past year.”

The combination of EMV, tokenization, and encryption signals a retail strategy to protect customer data on a variety of fronts, Grogman says. “Retailers realize there are significant costs associated with a breach event and are taking significant steps to protect their customers’ data on a variety of fronts,” he says. “Retailers that employ a multitiered approach, combining EMV compliance with [end-to-end encryption] and tokenization, will have the strongest payment security platform.”

As for why 35% of retailers plan to add NFC support, part of the explanation is that Apple Inc.’s Apple Pay has excited consumers. The survey found that 30% of retailers plan to add Apple Pay support within the next 12 months. That is the highest rating among the alternative-payments types. Only 18% plan to add PayPal support, with 13% anticipating in-app acceptance; 15% Google Wallet; 13% Softcard; and 8% each for CurrentC and Bitcoin.

With the future of Softcard uncertain CurrentC, the mobile-payments app proffered by Merchant Customer Exchange, could be a top contender. “While CurrentC may allure many retailers that are excited by the opportunity to eliminate credit card fees, the key issue is how cumbersome the process is for consumers and sales associates,” Grogman says. “Consumers have to open the CurrentC app on their phone, open the scanner, scan the code from the cashier, and wait for the transaction to be confirmed. That may present more friction from consumers than simply paying with a credit card, and it’s certainly more clunky than the sexy interface on Apple Pay.”

Apple’s branding expertise may be a factor. “However, when you combine Apple’s iconic brand, their significant investment and marketing efforts behind this service with the iPhone 6 line, and their savvy and loyal customer base, it is widely expected that adoption of Apple Pay as a payment source will continue to increase dramatically,” says John Eagles, a vice president at the consulting firm. “This will also allow retailers to start to recoup some of their investment dollars from their payment-terminal upgrades, which should create a win-win situation for both merchants and customers.”