US Payments Forum Market Snapshot: Industry shifts focus to touchless experiences, securing e-commerce and upgrades for EMV at the pump
PRINCETON JUNCTION, NJ (August 19, 2020) — The U.S. Payments Forum today released its latest Market Snapshot providing a look at the state of the industry, including the adoption of contactless, the transition to EMV at the pump, trending topics, and current Forum priorities and projects.
State of the Market: Industry prioritizes touchless customer experiences and changes at the POS due to COVID-19, delays EMV liability shift date for automatic fuel dispensers
With more emphasis on reducing transmission of germs and bacteria than ever, the payments industry has prioritized the touchless customer experience. One of the major parts of this shift has been accelerated contactless adoption. Visa reported that contactless usage in the U.S. has grown 150% since March 2019. Nine out of the top ten U.S. issuers are actively rolling out contactless cards to customers, with 175 million Visa contactless cards in the market. Mastercard reported a 40% jump in contactless payment transactions during the first quarter of this year alone, and found that 80% of contactless transactions are under $25, a range typically dominated by cash. In the U.S., Discover Network experienced a 46.1% increase in contactless spending in-store from Q4-2019 to Q1-2020.
This adoption comes alongside a change in consumer beliefs, with 50% of respondents to a recent American Express survey agreeing that contactless payments are safer for personal health than paying with cash or inserting a card. The survey also found that 58% of consumers who have used contactless are more likely to use the technology now than before the pandemic. Stakeholders at the recent U.S. Payments Forum virtual meeting, held over a two-week period this July, agreed that contactless adoption will continue to grow as consumers rapidly get comfortable with the technology.
“The COVID-19 pandemic has brought immense change to the payments industry, shown in how effectively merchants have responded to calls for cleaner payments and reduced touchpoints across brick and mortar stores,” said Randy Vanderhoof, director of the U.S. Payments Forum. “Industry leaders are dedicated to addressing these necessary changes and are still meeting virtually to remain connected in these times. Merchants and issuers are working to offer as many options as possible for consumers.”
Alternative shopping methods like curbside pickup, online ordering/delivery, pay-by-the-phone, and Buy-Online-Pickup-In-Store (BOPIS) have been increasingly offered across markets. A recent report from Adobe Analytics found that BOPIS increased 208% between April 1 and April 20 compared to the year before. American Express also found that consumers are 16% more likely to purchase online or by app for curbside pickup since the outbreak. This shift in consumer expectations for alternative shopping experiences has opened up omnichannel alternatives to many small and medium merchants and is a change that experts at the meeting agreed would expect to continue even after the pandemic. To help support further changes that respond to the pandemic, the Forum released a white paper and infographic containing tips for cleaner payments at the POS.
The current climate has also presented an interesting opportunity for fuel pump operators, as the payment network EMV liability shifts have been delayed to April of 2021. Presenters at the meeting reported that the pandemic had both positive and negative effects on the EMV migration. Some fuel pump operators have seen the slowdown in demand as an opportunity to move forward with installations and certifications without disrupting business hours. Visa shared that EMV now represents 21% of transaction volumes at the fuel pump, a number that has doubled since the beginning of the year. A recent Conexxus report found that 15% of sites are fully EMV-deployed, with 89% of those who have yet to deploy indicating that they intend to do so.
Those at the meeting shared, however, that many locations are still experiencing delays to labor and hardware. Many reported that the pandemic has contributed to the delays, with some waiting between 8-12 weeks for hardware. While 28% of sites have installed and upgraded functional hardware, 64% of respondents to the Conexxus survey reported that software was still a top challenge for deployment. Stakeholders are continuing to encourage fuel pump operators to install software and hardware when available and not wait for both components before moving forward. To help with this transition, the Forum recently published a resource on EMV fallback transaction best practices at the fuel pump.
Trending Topics: Securing fraud in new avenues, including e-commerce and alternative delivery options
Where payments move, fraudsters move as well. The methods of payment and shopping channels consumers use has rapidly shifted in the COVID-19 era, with TransUnion reporting that financial institutions have experienced a 250% increase in digital transactions. This movement points to the growing importance of mitigating risk in the digital space, as more online transactions, third party deliveries and alternative pick-up options can lead to more identity fraud and an increase in card-not-present (CNP) fraud.
Risk Based Security found that emails and passwords were the most frequently exposed data types by breaches in Q1 this year at 54.4% and 48.7% respectively, which can greatly contribute to account takeover. In that same study, the exposure frequency of credit card data accounted for 9.9% of breaches. These possible vectors are top-of-mind for merchants, and along with new strategies to deal with chargebacks, they are searching for ways to avoid these kinds of fraud. The Forum recently put out a resource on techniques used for mitigating CNP fraud to help with this challenge.
New tactics highlighted at the meeting to deal with this influx of fraud included the use of community-driven data and EMV 3-D Secure (3DS). Stakeholders also reported efforts to provide consumer education on phishing, as fraudsters leverage the pandemic with new attacks. Barracuda found an increase in COVID-19 related spear-phishing attacks since January 2020, with a 667% spike since the end of February 2020.
“Mitigating fraud associated with new purchasing channels has been a learning curve for merchants,” said Vanderhoof. “Many have adapted their strategies to authenticate customers at the point of pickup for curbside, BOPIS and more. Some have identified designated pickup areas and scanning barcodes on consumer smartphones as effective and touchless ways to authenticate. “
Forum Priorities: Preparing for long-term change in the industry
The industry has made great efforts to keep up with the changing needs and desires of consumers during the pandemic, with excellent progress in new, touchless experiences and options for cleaner shopping and payments. The long-term effects of the COVID-19 pandemic on retail, however, are still unclear.
The Forum is committed to taking a long-term view of evolving consumer behaviors, including their comfort with new payment technologies. Working Committees are making plans to explore the fraud ramifications of the shift to e-commerce without the needed protection of fully implemented security technologies. The Forum will continue to introduce and encourage implementation of fraud-fighting tools like 3DS, Secure Remote Commerce (SRC) and others.
The Forum has numerous EMV and emerging technology-related education projects currently underway, including:
- A resource on device authentication and cardholder verification techniques for mobile in-app and remote payments
- A resource on contactless payments limits and best practices for contactless acceptance
- Educational podcasts on mobile wallets
- A webinar on dual-interface (contact and contactless) card personalization
- A resource on cardholder verification method (CVM) choice at unattended terminals
- A white paper on fleet card acceptance at fuel pumps
- A white paper on debit routing and tokenization with card-on-file transactions
- A guide providing best practices on customer messaging for transit contactless open payments
- A white paper providing recommendations to enhance the understanding of common EMV terminology used in certification intake forms
- A project documenting retailer and financial institution use cases for mobile driver’s licenses
The U.S. Payments Forum published the following resources over the past quarter:
About U.S. Payments Forum
The U.S. Payments Forum is a cross-industry body that fosters open dialogue between industry stakeholders to enable efficient, timely and effective implementation of emerging and existing payment technologies through education, guidance and alternative paths to adoption. The Forum is the only non-profit organization whose membership includes the whole payments ecosystem, ensuring that all stakeholders have the opportunity to coordinate, cooperate on and have a voice in the future of the U.S. payments industry.