Both Contactless EMV Cards And Wallets Should Stock Issuers’ Offerings, Expert Argues

As financial institutions move beyond mag-stripe payment cards, they face a crucial question: should we support mobile wallets, and if we do, should we also issue contactless cards? In the eyes of at least one observer, the answer is an unequivocal “yes” and “yes,” even though the former would seem to render the latter unnecessary.

Indeed, issuers that think Apple Pay, Google Pay, Samsung Pay, or another third-party mobile wallet can leapfrog contactless EMV cards are mistaken, says Jamie Topolski, director for output solutions at Fiserv Inc., a Brookfield, Wis.-based core processor and payments provider. “Why bother with contactless cards?” Topolski asked the audience Thursday at a payments conference. Because “they are still extremely relevant,” he said.

The reason has to do with the fact that most card transactions still take place in physical stores. In fact, Visa Inc. says 80% of its U.S. transactions are still face-to-face sales. But, as Topolski said, “it’s going to take a long time for contactless acceptance to be ubiquitous.” Visa also says that less than 1% of its U.S. volume is contactless, and that includes mobile-wallet as well as card activity.

That fact underscores the versatility of contactless plastic, Topolski told executives attending the Payments Summit 2018 meeting convened in Orlando, Fla., by the Secure Technology Alliance, a Princeton Junction, N.J.-based trade group for payments technology. As stores install contactless-capable terminals, the cards will work with a simple tap. But if not, the consumer has several fall-back options. “If contactless doesn’t work, you can insert the chip,” Topolski said. “If that doesn’t work, you can swipe it. You can put the card on the old-fashioned knuckle buster, or just enter the card number.”

In fact, the term “dual interface” for a card with both contactless and contact EMV capability is a misnomer, Topolski said. With contactless EMV cards, he added, “There are up to five possible interfaces.” Maybe, he suggested, the proper term would be “penta-interface,” though it’s not likely many cashiers or customers would be pleased to resort to the alternatives to contactless functionality.

Issuers may also balk at the incremental expense of contactless cards, which can cost twice as much as contact EMV equivalents. But while conceding this point, Topolski argued issuers must weigh that one-time expense against the ongoing cost of renting space for their tokens inside a mobile wallet from one of the tech company “Pays.” As he pointed out, “If Pay transactions grow, that [cost] will become a much more significant factor.”

But it’s not as if issuers can afford to ignore mobile wallets. While their usage has been disappointing so far, banks will find that they must offer a wide range of wallet options as the payment method finally catches on. “If the bank offers Apple Pay and Google Pay, but the customer has a Samsung phone, Samsung Pay is what they want,” he said.

The advantages of wallets, though, are substantial, Topolski argued. They can work in-store, in-app, and online. And they are more secure because they replace actual primary account numbers with unique, tokenized data. If the device is compromised, issuers don’t have to replace the underlying card, just the token.

The ultimate benefit, Topolski noted, should be increased usage from an increased sense of security. “Over time, this will increase consumer confidence in the payment structure,” he said.