By Brian X. Chen, New York Times tech Fix, https://www.nytimes.com/2016/05/05/technology/personaltech/in-the-race-to-pay-mobile-wallets-win.html
Every weekend, when Pierre Houle works the brunch
shift at Olea, a neighborhood restaurant in San Francisco, many customers want
to split the tab on multiple credit cards, a process that takes much longer
than it used to.
For waiters like Mr. Houle, diners going Dutch is
nothing new. But now he has to take each of the credit cards, insert them into
a chip reader and wait about 10 seconds for every transaction to process. In
the past, he could swipe a card, wait a few seconds, print out the receipt and
get going. “It isn’t much, but in the restaurant world it can be enormous,” he
said. “I have to wait there, and I can’t go check on something else. You need
to move all the time when you do a job like that.”
Many merchants and retail workers are watching their
lives play in slow motion when they process credit cards. To combat fraudulent
transactions, the retail industry is shifting away from the traditional
magnetic stripe toward tiny computer chips embedded inside cards. The chip
technology, known as E.M.V. (for Europay, MasterCard and Visa) has been around
for decades in Europe. But starting last October in the United States, banks
pushed the liability of purchases made with counterfeit credit cards onto
merchants.
That means if a criminal swipes a counterfeit credit
card to buy something, the merchant now has to pay for it. The sweeping change
has compelled many retailers to upgrade their equipment to read chips, which
have stronger security than the easy-to-forge magnetic stripe. By the end of
this year, about 80 percent of all credit cards in the United States should
include chips, according to a new report by the fraud prevention company
Iovation and the research firm Aite Group. The chip initially may annoy
consumers. For most chip transactions, you have to dip the credit card into a
slot and wait for the transaction to be approved before you can remove it and
scribble your signature.
Mobile payments could be a quicker alternative. Some
of the biggest tech companies — Apple, Google and Samsung Electronics —
released mobile wallet technologies in the last two years, though they are
still a niche product. In the United States, only 0.2 percent of all in-store
sales were made with phones last year, according to a survey by eMarketer, the
research firm.
“Contrary to what Tim Cook said when Apple rolled out
Apple Pay, consumers have been swiping their cards for a long time and it’s not
that hard,” said Julie Conroy, a research director for the Aite Group.
I tested chip cards and each of the mobile payments
services in three different stores: Walgreens, BevMo and Nancy Boy, a small
beauty supply store in San Francisco. I inserted a chip card or tapped a phone
and timed how long it took each transaction to be approved and start printing a
receipt. The results varied slightly, but the mobile wallets were generally
much faster than the chip.
At
Walgreens, after I inserted a chip card, the transaction took eight seconds
before a receipt started printing; Apple Pay and Samsung Pay took three
seconds; and Android Pay (Google’s service) took seven seconds. At BevMo, the
chip payment took 10 seconds; Samsung Pay took four seconds and Android Pay and
Apple Pay each took five seconds. At Nancy Boy, the chip took eight seconds,
and all the mobile payment services tied at 2.4 seconds.
What
is happening with the chip to make it so slow? When you dip in the card, the
chip generates a one-time code, which is sent to the bank over a network. The
bank confirms the code and sends verification back to the terminal. With mobile
wallets, the same thing is basically happening in the background. They generate
one-time tokens that are sent out and approved by the banks. Stephanie
Ericksen, a Visa executive who works on security solutions for new payment
technologies, says the sluggishness of the chip is largely a perception issue.
The actual transaction time behind a mobile payment and a chip card is the
same.
But with the chip, most merchant terminals require you
to leave the card inside the reader until the transaction is complete and wait
for a screen to tell you that you can remove the card. With the mobile
payments, you can just tap the phone, and there is no extra screen telling you
to remove the phone, which partly explains why the transaction appears to move
along more quickly. Visa is addressing the perception of sluggish transactions
with Quick
Chip.
It is basically a coming software upgrade that will allow the terminals to
instruct the customer to dip the card and remove it right away.
Mobile
wallets feel faster, more convenient and less awkward to use than the chip, so
you should use them whenever possible. The caveat, of course, is that not every
merchant that takes credit cards also accepts mobile payments. To see if the
wallet is supported at a store, you will have to look out for Apple Pay or
Android Pay logos on cash registers, or a logo of a hand holding a card in
front of a wireless signal, which means contactless payments are supported.
That
brings us to the differences among the mobile wallets. They all work about the
same — take your phone out, enter your passcode or fingerprint and tap the
terminal — and they have their pros and cons.
Samsung
Pay is accepted by the most merchants because it uses magnetic secure
transmission, a technology that emits a magnetic signal to mimic the magnetic
stripe, meaning it can be used on most credit-card readers. Samsung Pay also
supports payments made wirelessly with near-field communications, for NFC, a
technology that enables devices to exchange information wirelessly over short
distances.
Apple
Pay and Android Pay can make payments over terminals that have NFC or inside
apps that support them, like Uber or DoorDash. Apple Pay is supported by more
banks than the Samsung and Android wallets. (I was surprised, for instance,
that I could not add a Chase card to Android Pay). Android Pay’s advantage is
it is available on the broadest array of devices. It can run on most Android
phones that support NFC, whereas Samsung Pay can only be installed on Samsung
phones and Apple Pay can only run on iPhones and the Apple Watch.
In a statement, Samsung said Samsung Pay was the most
accepted mobile payment service and it “dramatically decreases opportunities
for fraud.” Google’s senior director for Android Pay, Pali Bhat, said, “We want
Android Pay to be available everywhere, and everywhere means as many devices as
we can support.”
Jennifer Bailey, vice president of Apple Pay, said,
“Users tell us they love the convenience and speed of paying with their iPhone
or Apple Watch.”
In rare cases, there can be a long wait before you
take your chip card back. Mr. Houle, the restaurant waiter, also works part
time at the beauty supply store Nancy Boy. He recounted an incident in the
store when he dipped a chip card for a customer who left before he could hand
it back. He tracked her down on Facebook and mailed it to her in New York three
days later. “It was my fault as much as hers,” he said.
