How the Shift from Swiping to Inserting Cards Will Accelerate Mobile Payments
Let's face it. None of us likes to dip, even though we know it's good for us. If you are unfamiliar with dipping, it's the newest way to pay. Instead of swiping your credit card at the checkout line, you stick it into the payment terminal.
The reason for this shift is to protect consumers and merchants from fraud. What the industry refers to as "dipping" and consumers and cashiers call "inserting" is a way to fight a multi-billion dollar problem; credit and debit card fraud hit $16 billion last year, according to the 2015 Identity Fraud Report by Javelin Strategy and Research.
This is why new credit cards now have a colored metallic square on the front that interacts directly with the terminal and encrypts the transaction more securely. (Crooks can easily clone the standalone magnetic strip on your old card and use it for fraudulent purposes.)
This new chip requires merchants to install a new set of payment terminals to protect you and them. Federal law calls for banks to reimburse consumers for fraud but as of October 2015, if merchants are not using the latest terminals, the banks can go after retailers that have not properly updated their equipment.
So we're all inserting our credit cards now. It's something we've been doing at ATMs for years -- to keep from leaving our cards in the machine -- so why wouldn't we be happy to do it at a store?
One word: Speed.
When we're running errands or getting a cup of coffee, inserting a card takes time. Your credit card sits in a machine and you wait until the screen tells you to remove the card. If you do not pay attention and take out the card too early, the transaction fails. This irritating little glitch is really good news for mobile marketing. We predict it will cause consumers to finally adopt mobile wallets en masse and quickly become the future.
This is because we now equate tapping with speed and convenience. We tap and a car shows up. We get a text and immediately tap our reply. Someone likes a post and we tap to instantly find out, "Who?" Yet, thanks to cyber thieves we now must insert/wait/remove a card for all of the little daily transactions of our lives.
Why not tap, instead? Shifting to mobile store payments solves the transactional slow down. Our smart phone is our primary source of entertainment while waiting in a line, so the device is already in hand and ready to tap at the register while our wallet is stored away.
I tested out my theory with a local clerk at my favorite retailer who confirmed he is seeing an uptick in mobile payments because it is easier than waiting for the insert process. Digital wallets and near field communication (NFC) have been around for quite some time, but there was no compelling reason to use them until now. The new terminals are NFC-enabled so using a mobile payment solution is easy and fast.
Personally, I still pay with American Express, but I use my iPhone, not the physical card. This saves me time and also makes me a hero with everyone behind me in line. I have begun to use and witness this three-step behavior every day: Tap the app for the retailer on the phone. Tap the loyalty card at the register, redeeming offers I have opted into. Tap to pay. It's seamless, easy and I save money.
According to eMarketer, I'm not alone in my fondness for tapping. Mobile payments at physical point of sale are expected to more than triple to $27 billion this year in the U.S. Average spend will nearly double to about $700 annually this year. (Total mobile payment sales will rise faster than average spending per user in 2016 because more people will be adopting the technology.)
Millennials and Gen Xers are driving this trend and we anticipate it will cascade into other demographic groups, because who doesn't want to make daily life simpler? As consumers shift, we predict an uptick in offer-based app and digital loyalty cards vs. physical coupons and plastic loyalty cards. Brands already providing digital offers on mobile shopping apps will see more usage and adoption overall.
If you're still skeptical, here's a story to sway you: Look at what happened with the EZ Pass toll payment system. En masse we took an antiquated system of slowing down from 65 miles per hour to stopping to drop some coins in a basket or handing a ticket to a person. Now that process is frictionless and fast with only a few who choose not to participate.
What's next? In some states, driver's licenses are going digital. Combined with the shift to mobile payment, there will likely be a day soon when we can all leave our wallets at home on purpose. Pick pockets, beware.