Payments Testing - March 19, 2024
The COVID-19 crisis is clearly driving significant interest and adoption of contactless cards and “tap-to-pay” transactions by consumers. Visa has reported that contactless usage in the US has grown by 150% in the past year, while Mastercard recently announced that they saw contactless payments rise by 40% in the first quarter of 2020.
This means that card issuers are rushing to convert/reissue their card portfolios to include contactless technology, while at the same time merchants, acquirers and processors are all working to certify and deploy POS terminals and register systems to support the contactless implementations from the card brands and networks. This sounds straightforward enough, but there is still a lot of work to be done before the “tap” becomes as ubiquitous as the “swipe” or even the “dip”.
History Lesson
Contactless payments have been around for more than 20 years, with some implementations seeing more success than others. And while the industry has now generally agreed that EMV contact and contactless are the global standards to support interoperability and the drive toward ubiquity, there are still legacy programs in place that must be considered.
The most recent precursor to EMV contactless is called MSD (for Mag Stripe Data) and dates back to the early 2000’s. Despite the fact that both Visa and Mastercard promoted their respective MSD programs heavily, the market was not quite ready. Consumers and merchants failed to embrace contactless at that time and many programs were shut down.
But not all. There are still MSD cards in the marketplace, as well as POS devices and systems that support them. Unfortunately, MSD devices and EMV contactless cards are not compatible. (MSD cards are “single-interface” chip cards with no antenna that can only support one-way communications. EMV contactless or NFC cards are “dual interface” cards that can support bi-directional communications, a requirement to support full EMV processing.) This can cause considerable pain, especially for a merchant that made a significant investment to upgrade its systems to support MSD. For various issues (primarily security related), the card brands are now in the process of closing out the MSD programs, but other implementations, e.g. fuel cards, will continue to cause confusion in the marketplace.
It must also be noted that the EMV contact and contactless implementations actually have different requirements that can cause significant confusion across the payment industry and for consumers. For EMV contact transactions, EMVCo has established a single standard that the card brands follow, so if you “dip” an EMV card, you can be quite certain the transaction will be processed. Unfortunately, this is not the case for contactless, where each card brand has a unique processing scenario. It is not uncommon therefore that “tap” transactions work sporadically from one merchant to another.
These issues also cause problems in other areas. Processing for US regional debit cards, fraud management systems, ATM processing, chargebacks, as well as ongoing education for consumers and retailers are all complicated by contactless.
The US fuel industry is particularly hard hit by this complexity. The industry is already under the gun to complete the implementation of contact EMV at Automated Fuel Dispensers (AFDs) and has been facing significant COVID-19 related issues associated with the limited availability of resources, parts, and certification windows. Fortunately, the card brands have pushed the liability shift for AFDs out into 2021, but now consumers want AFDs to go contactless at the same time.
Timing is Key
Before COVID-19, there were already several good reasons why contactless makes sense:
The pandemic has caused both consumers and merchants to embrace contactless as a preferred way to pay. Issuers, merchants, acquirers, and processors all want and need to react quickly to service the new demand or face the risk of losing customers and/or transactions.
With that said, contactless EMV presents a number of unique challenges for the payment industry including testing, certification, fraud management and chargeback processing. There will be even more issues to iron out as we start to work aggressively to implement EMV contactless support at ATMs.
But consumers want more than to pay with a contactless card or a smart phone. They want even less contact, less friction in the payments process. Consumers will be looking for more No Checkout options like Amazon Go, more delivery services, and subscription options. IoT payments are sure to proliferate in the coming months and years.
Change is inevitable. Change is good. And for those organizations who can deal with rapid change, even chaos, effectively, it can be a competitive differentiator. A key component in dealing with change is the ability to test. Organizations that take a modern and proactive approach to payments testing will have the best opportunity to survive and thrive.
Unfortunately, 47% of organizations say that testing is the biggest cause of delay in their development process. At the same time, 42% of organizations indicate that they still rely solely on manual testing, because they are too busy dealing with all the change!
The best way to deal with unrelenting change is to put the right people, processes, and tools in place so that your organization can adapt and respond as quickly as possible. We need to recognize and remember that everything that changes must be tested. So improving your ability to test by using modern solutions that facilitate automation, integration, and collaboration should be a core part of your business strategy.
The coronavirus situation clearly highlights the importance of preparation and readiness when it comes to dealing with uncertainty and disruption. As we have already seen, some organizations are thriving while others are not even surviving. The entire payments industry must learn from this experience so that we can work together for the benefit of all.
