The rapidly evolving payment industry is undergoing a new chip and PIN revolution in Canada and merchants will need to stay on their toes to keep up. Industry observers, including a newly appointed Canadian INSIDE Contactless executive weigh in on the issue and Rafael Ruffolo writes about it for ComputerWorld Canada:By: Rafael Ruffolo, ComputerWorld Canada (29 Jul 2008)
With chip and PIN contactless technology set to hit widespread adoption by 2010, industry watchers are advising merchants to look at how the new payment method can benefit them in fraud reduction and value-added services, rather than worrying about the initial implementation costs.
“This is a little like the early 1980s with PCs,” Catherine Johnston, president and CEO at Advanced Card Technologies (ACT) Canada, said. “We’re beginning to understand the capabilities and the things we will be able to do with chip cards and I think merchants will need to look at the positive gains.”
Whether the positives of chip and PIN – which refers to a movement which will equip all credit cards with a chip and PIN number–will outweigh the implementation costs for Canadian merchants remains to be seen. Members of the payment card industry, including Interac Association, MasterCard Canada Inc. and Visa Canada, are in the midst of a chip and PIN trial in Ontario’s Kitchener-Waterloo area.
France-based payment chip maker INSIDE Contactless creates chip sets that are used for access control, ID, transit and other applications. Kim Madore, the recently appointed vice-president of sales and business development for the company’s Canadian operations, said the results of the Southern Ontario rollout has been promising and mass migration to the contactless payment technology should get underway this fall.
“For merchants, it will be fraud reduction that gives them the business model to move forward with this,” Madore said. “Plus, Canada has had PIN since 1992 when Interac was introduced, so consumers will be very accustomed to the technology and recognize the security benefits.”
But while the hype around fraud reduction might be enough to get consumers onside, some merchants might have a difficult time making a business case on that fact alone. Lise Dellazizzo, senior vice-president of technology research at Harris/Decima said that even though widespread rollout will occur within the next two years, many merchants haven’t had a chance to work with the technology yet..
A significant problem for some merchants, Dellazizzo said, is the expensive hardware and software costs involved in the migration. She said while businesses in the food services industry – which often rent their payment machines – may get off relatively easy, it will be a far different story for merchants in other fields.
“For the folks in the oil and gas sector, retrofitting the pumps will be a costly job,” Dellazizzo told ComputerWorld Canada earlier this year. “It’s been very difficult for the card associations and the players to convince these merchants that there is an ROI in making the move. And when it costs you $15,000 to replace each pump and you’ve got thousands of them across the country, it can be a tough pill to swallow.”
But according to Madore, merchants in many industries – including the oil and gas sector – are already taking steps to plan for the technology. “With respect to Canada and the gas industry, many of the pumps are already retrofitted,” she said. “You take a Petro Canada and they’ve even gone to the extreme of retrofitting for contactless technology as well.”
Johnston agreed with Madore, saying that most service companies have experienced similar changes over the last few decades and should be able to handle the changes that come with contactless payment technology. She added that as early as ten years ago, credit and debit card readers were missing from gas pumps.
“We’re now looking at technology like mobile payment, near field communication (NFC), and dual-interface cards that have both contact and contactless technology embedded,” Johnston said.
Her advice to merchants was to accept the fact that the payment industry is constantly evolving and take advantage of the advancements the technology can offer.
“For instance, if you look at a smaller merchant, they really don’t have a strong business case for issuing their own loyalty program cards,” she said. “But because chips can have multiple applications on the same card, merchants can band together and each put their own applications on consumer credit cards.”
Besides cutting down on the amount of credit cards in your customers’ wallet, Madore said the technology can also make transactions more personal.
“What if you went to a checkout at Tim Horton’s and the terminal actually greeted you with personalized information?” she asked. That aside, the bottom line for merchants is that it won’t be a matter of “if” they upgrade, but rather “when” they upgrade.
Visa Canada has already said Canadian businesses will need to get onboard with the new technology by October 2010 or the liability for payment fraud claims falls to the merchant themselves.
The ongoing Kitchener-Waterloo payment industry trial is scheduled to be completed this fall.
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