February 13, 2015
Editors Note: In the US for over 50 years there really have been no Chip Cards. Thus, we think, this posting may seem much more over the top to someone outside the U.S. where EMV is commonplace (Europe) and had years of adoption
Change Is Upon Us: The Swipe Gives Way To The Dip, The Hover Or The Wave
On October 1st, 2015 a quite unnoticeable line will have been crossed for payment acceptance in the US, a mandate from Visa, MasterCard American Express and Discover will begin to take effect at every retail merchant that accepts payment cards. This mandate shifts liability for many payment transactions fully to the merchant if they do not have a payment card terminal that accepts EMV cards and/or NFC based transactions. This sounds like a deal for merchants but what about consumers. Read on, it is the consumer that will face the largest elements of the EMV shift. It will get very bad before it get better.
In 1995 The US Did Not Hop Aboard the EMV Train
In 1995, Euro Pay, MasterCard and Visa (EMV) formed a committee for the purpose of establishing a standard that allowed for payment cards to have a secure, encrypted, embedded 'chip.' These competing companies were starting on diverging paths prior to forming this group and thus would have required merchants to use 3 different payment card terminals to accept all 3 payment products. Although it was at one time common for merchants in Europe to not accept all 3 payment products, it was actually becoming more popular to offer as many payment options as possible. There were quite a few other reasons for the standardization, but a common and interoperable design was the basis of the group.
In the epoch when EMV was formed a typical medium distance phone call in parts of Europe could cost the equivalent of over $3.00 for the first minute. The payment card terminals used the telephone network for authorizations. With a base of ~$3.00 per transaction added to the cost of actual service, there had to be something done to allow smaller transactions to be approved without the need to make a phone call. The eventual solution to this problem was to build self authorizations into the payment card and, while it became one of the most important elements in accepting payments via cards, it is now forgotten for the most part. The other aspect was of course the encryption that would make it harder for a counterfeit payment card to be presented.
EMVco was successful in motivating most of Europe to adopt this standard because of the amount of fraud losses from counterfeit cards via pressure from various government entities that made it a requirement. However EMV did not get wide acceptance in the US for a number of quite unrelated reasons.
One reason for the rejection of EMV at retail businesses was that the acceptance process of an EMV card is noticeably longer in real life use cases. The compounding effect is that lines grow longer and they slow down. This may not seem to sound like a big problem until you are personally caged into one of these lines. This reason alone made large merchants instantly reject the notion of bringing EMV to the US for over 20 years.
The EMV Experience: Confusion And Befuddlement Will Reign
The recent payment card breaches along with the Visa and MasterCard mandate for EMV upgrades moved this back to the forefront. As we stand today, there is no doubt that you will have an EMV/NFC card replacement from your payment card bank by the end of 2015 and you will be forced to Dip(insert the EMV card correctly into the EMV slot) and not swipe your payment card at customer facing payment card terminals.
I have studied this issue, I call the EMV UX (User Experience) Fail, for over 15 years. Most recently my research brought me to Canada as they moved to EMV requirements. Canada is just getting over the years of transition to EMV. In addition, the UK after 20 years of EMV there has been a consumer and merchant rejection of EMV moving towards NFC cards and Smartphone NFC. This trend is beginning to play out throughout the world.
With the EMV UX Fail, consumers will have little choice but to get to know and understand payment card terminals and not only determine if one needs to Dip or swipe, but also locate the proper slot, orient the card correctly- with a four to one chance that it may be the wrong orientation and maintain a the card in contact with the EMV reader for long 10-30 seconds or more before the transition is complete. But how will you know how long the card needs to remain in the EMV reader? Finally a PIN number or a signature will be required along with an enter button or tap.
Enter Stage Right In The EMV UX Fail Drama, Apple Pay
In contrast, with exquisite timing, Apple has introduced Apple Pay at the exact moment to have the biggest impact on the EMV UX Fail and the requirements for merchants to update payment card terminals to be EMV ready. This upgrade path is usually free for most small and medium sized merchants and would be absurd to not include NFC (Wireless EMV) as it is usually built in. Now that Apple Pay’s success is already legendary one can be nearly 100% certain that all new payment card devices will be EMV and NFC ready.
Apple Pay’s unique UX has been trumpeted across the internet and major media outlets. The experience is that of a simple finger placed on a iPhone hovering over the payment card terminal to complete the transaction.
I have created a rather simplified user experience flow to illustrate the EMV UX Fail in contrast to the Apple Pay UX. To be very clear there are other branches and many variations of flow based on the business type and other factors. I also did not include true time and motion research inputs as this is currently quite proprietary and valuable.
The EMV UX vs. the Apple Pay UX:
Too Simple Or Too Complex Payment Card Devices Will Not Fix The Problems With EMV Transactions
It is immediately evident that from the outset there is a befuddlement factor as to how a EMV payment card transaction will be conducted. Does one swipe at a particular payment card terminal or does one Dip?
How does one orient the payment card? For many, they may have issues identifying the Chip contacts from the hologram. This may sound like a non issue, but think about age, eyesight and lighting conditions. Compounding this are the massive variations of payment card devices that offer an EMV slot in many different locations on the device. There is no standard, it can be in front, on top, the middle or on either side.
The typical non-tech payment card user will experience a four in one chance to be correct in determining the orientation of the payment card. Some will just take time to examine the card and the payment card terminal and some will just try and guess perhaps with a correct choice in two tries.
We all know and love the very sweet older person in the line, in front of us. This experience will soon take on new dimensions as they are forced to use new EMV cards:
Indeed, an honest non payment expert insight would be, what the heck? The EMV UX Fail can not be fixed by creating overly simple or overly complex solutions. Ironically the overly simple beautiful to look at white card reader befuddles almost as much as the overly complex traditional customer facing payment card terminal.
It is very important to realize that as the above UX flow chart shows that unlike a swipe, an EMV transaction requires the EMV payment card to remain in the payment card reader until the transaction is fully complete. This is not close to the learned behavior from swiping. This UX is quite unlike a swipe where the card only has contact with the reader for seconds and unlike many ATM machines that retain the card. This is an entirely new payment experience. Oh, and don't forget to remember to retrieve your payment card as it sits idly in the EMV reader.
Apple Pay UX:
Most fuel pumps experience a 47% card orientation fail, even when there are clear graphics. I have studied this issued well. The fact is there are high odds that you and I have made this orientation fail and continue to do so:
Specimen of an automated fuel pump with payment card terminal.
There is a fork in the road clearly demonstrated by the UX flow chart and the videos above. What road would you take? What road would you want the person in front of you to take?
My direct research concludes that EMV transactions can add up to 60 seconds to the standard card swipe transaction for an early EMV user. My time and motion studies do show this delay improves but not ever really equal to the speed of the old card swipe.
Apple Pay on the other hand is already significantly faster than a traditional payment card transaction and will improve as more newer terminals are deployed with the proper software builds and downloads.
The EMV UX Fail is one reason I advanced the thesis in 2011 that as we enter into the EMV transition we will quickly become aware of the very real issues this payment technology creates. It is also one reason I have been advising payment companies to pay heed to history, empirical praxis and true domain experience in planing products and solutions. Sadly we can see the results in how some have not supported Apple Pay day one and instead are now promoting overly simple EMV devices that are being sold to merchants for $30.
EMV is also being side stepped by tokenization and this is a far more secure system. It is the path to the future .
To be sure, I have discovered a number of solutions to the EMV UX Fail. There are a number of ways using the right technology, psychology, hardware and software to minimize the primary and secondary points of befuddlement and confusion. Sadly, thus far not a single payment company or their devices have adopted these solutions.
The Gravity Of The Situation
Gravity cares not who you are, how smart or not smart you are, how wealthy or poor you are, it will ultimately have its way with you. The gravity of the EMV UX Fail is a gravity well that will ultimately have its undesired way with you and I and everyone else. The results are, if one can, and currently this means Apple Pay, they will…
…Skip the Dip.
If not we will all harken back to the time that Dorothea Perry took her iron to magnetic tape on a thick cardboard card in 1960 to aid IBM to create this modern marvel, on to just this year, the US has enjoyed huge growth, adoption and innovation with payments that use the over 50 year old magnetic stripe.
Specimen of one of the first magnetic stripe cards, circa 1961.
So the next time you are in line, perhaps spending these moments on your new iPhone 6, look at the line in front of you and ask yourself how the coming EMV UX fail will manifest in front of you in the future. Will you say That's it' like Tim Cook in the video above, or will you just say:
Don’t forget your card…