Could the new kid on the block see EMV languish?

EMV is the global standard for credit and debit payment cards based on chip card technology (the name is taken from the Europay, MasterCard, and Visa schemes that originally developed it). But as a would-be market disruptor, Apple Pay, which allows smartphones to be used as a payment device, has the potential to shake up EMV despite some resistance from the big end of town.

CoreData’s Future of Banking research shows the best clues to the future of EMV in Australia come from the US – where of the 12.5 million credit card terminals, 3.2 million of them are able to use the EMV payments system.

Australia tends to be a better and faster adopter of these systems but as it stands, among the Big Four banks only ANZ has embraced Apple Pay. The rest remain Android only.

Why the resistance?

There are three effectively competing systems in the transaction space – Android Pay, Samsung Pay and Apple Pay. Of these, Apple Pay is considered by technology reviewers to have the best features, and best customer usability. Why then is it out of fashion in Australia with such a limited take up?

The economic question for the banks at the moment, given the successful penetration of the Tap and Go cards (reportedly the highest in the world) is whether there is any benefit in pushing into these systems. This is especially pertinent as ANZ revealed recently their take up of the Apple Pay service has been lower and slower than expected.

Limited take up in the US

The issue of poor consumer acceptance has been identified in the US also. Research suggests that while the number of North American consumers who know they can use their phones as a payment device jumped nearly 10 percentage points since last year, to 52%, actual mobile-payment usage remained flat. The percentage of consumers who used their mobile phones to make at least one payment a week grew only 1 percent, from 17% in 2014 to just 18% in 2015.

It’s definitely a case of “watch this space” to see how things progress. As it stands, Apple Pay gives consumers the option of exploring a new way to transact – and that’s a good thing. However, it could be premature to describe it as a game changer, and it looks like those familiar plastic cards aren’t heading the way of the dinosaur anytime soon.