Posted by Bethany Frank on 12 Jan 2016
From chip cards to Apple Pay and more, 2015 brought a number of innovations in the payments industry. With 2016 just kicking off, here’s a look at some of the top payments trends and developments to keep an eye on as the new year unfolds.
The Transition to EMV
The introduction of EMV chip card technology in the United States was arguably the most important development in payments last year, or perhaps even the past few years. Data shows that card-present counterfeit fraud has decreased by as much as 80 percent due to chip-card adoption, but the transition isn’t fully complete. Widespread adoption of chip cards was slow in 2015 largely due to a lack of both merchant acceptance and consumer awareness. Even businesses that installed new payment terminals often failed to turn on chip functionality, causing a lot of confusion for consumers and employees alike. However, consumers are expected to become more comfortable with chip cards and use them regularly in 2016, especially since businesses now risk facing penalties if the new payment terminals are not running.
Mobile payments have been a hot topic for a while now, but because the market remains largely undeveloped, stories about new and existing platforms are likely to make headlines again in 2016. It might have been premature of Apple CEO Tim Cook to dub 2015 the “year of Apple Pay”, but the tech giant’s foray into mobile payments did lead its biggest competitors to also aggressively pursue the mobile payments market. Unfortunately for all of them, there hasn’t been a clear winner yet.
One of the biggest challenges to mobile pay adoption stems from merchants, as many of them still lack the necessary technology to accept mobile payments. Mobile payment adoption is expected to rise as more merchants install and begin using new chip-and-pin card systems in 2016. Many of these new payment terminals will come equipped with NFC capabilities, making transactions through apps such as Apple Pay and Samsung Pay possible.
Merchants are also investing in developing their own mobile payment platforms, another reason mobile payments are expected to become more popular in 2016. Many top retailers—including Walmart, Target, and Best Buy—banded together in 2012 to create MCX and develop a joint-venture mobile payments platform called CurrentC. Members of MCX agreed to refuse other mobile payment platforms in favor of developing their own, effectively putting up a huge block against companies like Apple, Google, and Chase. Despite some success, MCX and CurrentC failed to gain enough traction over the years, and some members have strayed from the agreement to develop their own mobile payment platforms. In 2016, expect to see merchants unveiling these native platforms.
Consumers have come to expect or even demand convenience, efficiency, and virtually instant speed. Real-time payments are taking center stage as a focus for financial institutions and business strategists heading into 2016. According to Accenture, “to retain and win customers in the future, banks must migrate their entire product and service mindset towards immediate delivery, both of payments and also all other banking-related offerings.”
Last January, the Federal Reserve highlighted the need to develop real-time payments capabilities as a strategy to improve the U.S. payment system. Late last year, private-sector ACH operator The Clearing House (TCH) announced its plans for a real-time payments system that will enable individuals and businesses in the United States to make immediate payments. TCH is owned by the world’s largest commercial banks and processes about 50% of commercial ACH volume in the United States. Without regulatory mandates, a full overhaul of the U.S. payment system is unlikely anytime soon; however, over the next year, consumer pressure and support from powerful financial institutions are likely to drive innovation and thought that will eventually make real-time payments a reality for U.S. consumers and businesses.
With so much developing throughout 2015, there is plenty in the payments space to speculate about in the year ahead. We are likely to see many of the developments of 2015 come to full fruition throughout 2016. The year also holds the possibility for further developments in payments technology, such as a bigger push towards real-time payments in the United States. Regardless of which breakthroughs end up making news in 2016, there is sure to be a lot of innovation and activity around making payments faster, easier, and more secure for consumers.