Photographer: Simon Dawson/Bloomberg

MasterCard, Visa Try to Speed Chip Transactions After Complaints

  • Retailers will have to upgrade their payment terminals
  • Inability to develop an industry standard could cause delays

Following complaints from retailers, MasterCard Inc. and Visa Inc. have introduced software that they say will speed up slow check-out times for shoppers with new chip-based cards.

With the new software, the checkout experience for owners of the security-enhanced chip cards should come closer to those with the old magnetic stripes, the companies say. Consumers will be able to dip and remove their cards, instead of leaving them in payment terminals to complete purchases.

Retailers have grumbled that chip cards have increased checkout time by about 10 seconds per customer -- an eternity for a fast-food restaurant struggling to keep up with rush-hour demand. Store owners had to meet a deadline of Oct. 1 of last year to start accepting the cards or be on the hook for some fraudulent charges.

“We are glad to see them fix this problem, but we don’t understand why they couldn’t fix it at the beginning,” said Craig Shearman, a spokesman for the National Retail Federation. “It lacks credibility to think they didn’t know how to do this six months ago.”

MasterCard’s Chip Conversion
U.S. Consumer Credit Cards With Chips 67%
Change Since Oct. 1+51%
Locations Accepting1.2 million
Source: Company Data

Chip cards reduce fraud and consumers like them, MasterCard spokesman James Issokson said. The company works with retailers to address their concerns, he said.

Many retailers, particularly in fast food, have chosen to delay accepting chip cards for fear of increasing lines and angering customers. Since last October, these stores have had to shoulder any losses stemming from use of counterfeited cards. But with fraud levels doubling at some stores, many restaurants that held off will have to start accepting chip cards -- a transition that MasterCard, Visa and other card networks have pushed for. The new software could reduce the pain of this switch.

“It’s faster,” Ajay Bhalla, president of enterprise risk and security at MasterCard, said in an interview. “So if you are a coffee shop, you don’t have customers standing in a queue. It’s equally secure, just changing the process flow a little bit.”

Regardless of whether the new technology helps reduce checkout times as card companies promise, the software will improve shoppers’ perceptions of longer waits, said Thad Peterson, an analyst at payment consultant Aite Group.

“It will help in terms of simplifying the transaction process,” Peterson said in an interview.

Bumpy Entry?

As with much of the transition to chip-based cards in the U.S., introducing the new technology may be bumpy. The change will require an upgrade to the software running on merchants’ in-store terminals, and that could involve extensive testing to make sure everything works. More than 1 million U.S. merchant locations already have chip-enabled terminals, according to Visa, which expects many to embrace the new software.

“It’s easy for Visa and MasterCard to come out with these announcements, but it’s not as easy for the retailer,” Richard Crone, chief executive officer of mobile payments strategist Crone Consulting LLC, said in an interview. “This is lipstick on a pig.”

A slow rollout of the new technology could lead to more customer confusion, just as most Americans are still learning how to use chip cards.

“Some merchants will have it, and some merchants won’t have it, and it will add to the confusion, because customers won’t know what to do in every situation,” Peterson said.

Maybe Next Year

While some larger merchants may be able to make the switch or upgrade before the U.S. holiday season, others will likely put off the change until next year, Crone said.

MasterCard announced its new M/Chip Fast technology Wednesday, while Visa unveiled a similar technology, Quick Chip for EMV, which lets customers dip and remove their cards in two seconds or less, on April 19. For shoppers to fully enjoy the benefits of the new software, payment systems may have to adopt and implement both card-issuer’s software changes -- until the industry agrees on a common standard.

“Obviously the last thing they would want to do is have one set of instructions for Visa and a different set of instructions for the other networks,” David Nelms, chief executive officer of Discover Financial Services, said in an telephone interview last week. “We’re certainly looking at it, but I think I wouldn’t expect to see a change at point of sales tomorrow.”

Card networks also have to win the backing of payment processors and makers of the payment terminals that use their software. MasterCard has gained support for M/Chip Fast from large processor Vantiv Inc. Visa, meanwhile, has received endorsements from the U.S.’s largest terminals makers, VeriFone Systems Inc. and Ingenico Group SA, according to a statement. VeriFone is evaluating M/Chip Fast, Richard Char, a senior vice president at the company, said in an e-mailed statement.

“Our initial sense is the two protocols are very similar and might be implemented with a single solution,”’ Char said.

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