SAN DIEGO–Mobile payments actually could increase the use of cards instead of replacing them with phones, an analyst said May 11 during a panel discussion on the future of merchant acquiring here at the Electronic Transactions Association’s Annual Meeting & Expo.
The increase in card use would come because mobile-payment services enable small, traveling merchants, such as gardeners or pizza-delivery workers, to accept cards more easily and often for the first time, said Gwenn Bézard, research director of the Boston-based Aite Group LLC.
Setting a 12-cent cap on debit card interchange, as proposed by the Federal Reserve Board, also would drive the use of cards by making acceptance less expensive for merchants, Bézard told a packed house in a convention center meeting room. Merchants today pay about 44 cents on average in interchange per debit transaction.
Meanwhile, mobile applications are beginning to help blur the line between online and offline commerce, he said.
As an example, Bézard cited RedLaser, a free smartphone scanning app owned by eBay Inc. When shoppers see items of interest in a store (offline shopping), they can scan the barcode using the RedLaser app to call up price comparisons at other brick-and-mortar stores or at virtual stores (online shopping).
Also capturing greater market attention are digital wallets, which are attracting “a lot of focus and money” these days, Bézard said. The technology enables smartphones to store users’ card and other payment information and make wireless transactions.
When it comes to mobile payments and the future, no one wants to be left behind, the speakers agreed.
But clouds may gather on the industry’s horizon if the card networks seek to increase their value by encroaching upon the acquiring industry’s turf, Bézard warned.
Visa and MasterCard have no desire to pressure the ISO business, but the card networks want to build a presence in digital wallets as a hedge against the possible erosion of the plastic card business, Bézard tells PaymentsSource. That move would require the networks to seek relationships with merchants and could lead to “stepping on the toes” of the acquiring industry, he says.
Whatever paths the networks follow, however, consolidation will remain prevalent in the acquiring business, Robert O. Carr, chairman and CEO of Heartland Payment Systems, told attendees.
Of the 36 top processors in 1994, only seven of the names survive today, Carr said. “And there is no reason to think consolidation is not going to continue,” he added.
Carr described the mobile handset as the payment tool of the future. Young consumers want to use cell phones for everything, even to access to their dorm rooms, he noted, predicting that “they’re going to get it.”
Moreover, the spread of the EMV chip-and-PIN standard in the United States will come sooner instead of later, with significant inroads before the end of this year, Carr said.
However, terminal manufacturers have been shipping EMV-enabled hardware for some time, and the switch to the technology can take years, Bézard noted.
The fact that the American payments industry has adopted chip-and-PIN technology more slowly than counterparts abroad does not indicate backwardness on the part of the Americans, Bézard said. The U.S. industry could even leapfrog other nations to the forefront in contactless deployment, he said.
In another possible technological advance, small merchants now have the ability to connect their payment system to business software for accounting, inventory and other functions, Greg Hammermaster, president of the payments solutions division of Sage North America, an Irvine, Calif.-based subsidiary of the United Kingdom-based Sage Group PLC.
Best practices often remain aspirational. Common practices, the ones actually in use, take on far more importance, as is occurring with the integration of payments and business software, Hammermaster said.
Small merchants want the efficiency of that integration but stubbornly refuse to pay much for it, he noted, citing research Sage commissioned.
Small merchants also are eager to expedite payment, especially with checks, Hammermaster said. But Sage’s research found that merchants believe they should address the issue of mobile payments before anything else, he said.
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