When it Comes to Credit Cards, Retailers and Customers Agree: Both Hate Change

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When you've been doing something the same way for all of your life, it's no fun to change. That's one conclusion that could be drawn from two of the most recent credit card technologies that failed to be embraced by both retailers and their customers.

Smart Chip Readers Aren't Being Deployed

In October of 2015, the credit card industry was predicted to embrace a new standard of embedded microchips, often called EMV smart chips after the creators of the standard Europay, MasterCard and Visa. After a rash of high-profile security breaches among major retailers like Target, many industry experts predicted that merchants would rush to embrace this new standard that replaced the antiquated and more vulnerable magnetic stripe readers.

But by April of 2016, MasterCard had estimated that only 30 - 40 percent of merchants had smart chip compatible terminals installed and their chip readers activated. This was surprising as the industry underwent a liability shift, making merchants potentially liable for the cost of fraudulent transactions when they failed to upgrade their terminals. And as shoppers have noticed, many stores have the correct hardware, but their chip readers that have yet to be activated. Often, retailers blame the high costs of the software necessary to enable the chip readers.

Mobile Payments Do Worse

Many in the credit card industry would love to settle the debate between magnetic stripes and EMV chips by skipping past both and migrating to mobile payment systems such as Apple Pay, Android Pay and Samsung Pay. Yet in 2015, a mere 0.2 percent of in-store sales in the United States were conducted using a mobile payment system.

Many shoppers have found that swiping their credit is still faster, while others might not find any advantages to be worth changing their habits. Ironically, the slow speed of some EMV chip transactions might be one of the few factors driving adoption of mobile payment systems. In a sense, the credit card industry appears to need to take a step back before taking two steps forward.

As a result, there are some retailers and card issuers that have offered incentives for using mobile payment system. For example, the Starbucks payment app has become very popular as it ties into their loyalty program and allows customers to place orders without waiting in line. By offering this kind of tangible benefits to customers, Starbucks doesn't need to exert too much effort making the case for mobile payments over traditional credit card use, and both the company and its customers use the mobile payment system to save time and money.

The Future of Credit Cards and Payment Technology

Americans are only now just starting to see their credit card accounts as a financial instrument untied to their physical cards. Ultimately, one of several mobile technologies will win the current competition to become the next generation of payments, perhaps one that hasn't even been created yet. When that technology offers obvious benefits to both merchants and their customers, it's adoption will surely occur much faster than smart chip terminals or the current mobile payment options have. And when it does, we will all see how obvious the solution was in retrospect, and wonder how we ever got by without it.

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