The push for mobile payments in the U.S. continues to build steam as banks shift to more secure chip-embedded credit and debit cards for consumers -- and merchants embrace payment terminals that can accept the new cards.
Retailers like WalMart have over the past year been installing in-store payment terminals that accept the cards. The terminals will also work with NFC-ready smartphones like the iPhone 6 and 6 Plus, which use Apple Pay.
But while big-box stores have pushed ahead on mobile payment systems, smaller shops are moving more slowly as they scout out cheaper alternatives. Newly installed payment terminals can cost thousands of dollars. As a result, only about half of the 12 million payment terminals nationwide are likely to be converted to support chip cards or be NFC-ready by the end of the year.
"A lot of small- or medium-sized merchants are on the sideline," at the moment, said Brad Brodigan, vice president of retail for PayPal. "They are trying to understand the cost for the hardware and software to make the change and most see it as an investment or cost."
Options for smaller retailers are emerging, however, that could spur growth in the industry:
- PayPal plans to ship technology in October similar to what it introduced in the United Kingdom and Australia. "PayPal Here" can read a chip card inserted into a slot or read the card wirelessly when it's held nearby. PayPal Here can also accept a magnetic swipe from a traditional debit or credit card and includes a numerical pad for entering a PIN. PayPal expects each Here device to cost a merchant $100 to $150.
- Fast-growing Square has unveiled a $49 contactless reader -- the Square Contactless and Chip Reader -- for use with chip cards and NFC smartphones. The small wireless device will read a tablet or smartphone using Apple Pay or another NFC-ready payment system, as well as the new chip cards. Square is offering 250,000 of the devices for free for merchants who want to preorder. The company expects to ship the readers this fall.
- More traditional point-of-sale terminals that are usually affixed to a countertop continue to be an option -- though these are more expensive. These higher-priced versions can cost $600 to $2,000 apiece and come from dozens of vendors, including HP and Logic Controls.
Jordan McKee, a 451 Research analyst said the smaller devices from Square, PayPal and others are likely to be the cheapest option. "These cost-effective solutions provide small merchants a quick and easy onramp to accepting new payment technologies such as Apple Pay and chip cards," he said. "I see dual-interface [chip and NFC-ready] solutions as playing a signature role in building out acceptance amongst small merchants who are widely anticipated to be late adopters."
Also spurring adoption: Card counterfeit fraud liability will shift from banks to merchants on Oct. 1. As a result, Brodigan said, retailers run the risk of liability if they don't upgrade their terminals.
With reports by Matt Hamblen at Computerworld.