US integration of contactless payment terminals relies on EMV chip adoption
May 21, 2013

Contactless payment terminals are readers that do not require physical connection with consumers' plastics to accept credit card payments. Similar to near-field communication technology, the method is still new to the commerce market and requires smart chip-enabled cards. Sage Pay, the United Kingdom counterpart of Sage Payment Solutions, has already introduced the transaction platform in Ireland.

Virtual terminal credit card processing is set to bring value to customers who prefer not to pay for purchases with cash by allowing them to utilize their cards in a fast and easy way. Although the United States has not seen wide adoption of EMV-chip technology, if credit card issuers do start to utilize smart chips, contactless payment terminals could become another credit card processing option for small businesses to deploy.

Use of virtual payment terminals increases abroad 
Contactless payment terminals rely on smart chip technology. Smart chips, also known as EMV chips or radio-frequency identification (RFID), are still just arriving in the U.S. but are widely used across Europe and in other countries. According to NFC Times, only 2 percent of the more than 7 million businesses in the U.S. that accept credit cards have adopted contactless point-of-sale equipment. Visa Europe projects more than 58 million contactless payments will be conducted every month throughout Europe by the end of 2013. 

Sage Pay has already announced more than 6,000 virtual card machines have been installed throughout Ireland. In the U.K., more than 143,000 contactless terminals have been introduced into the retail marketplace.

Sean Wilson of Sage Pay told Ireland-based news site Business and Finance that society is set to become cashless in the near future by reducing the time consumers spend in the check-out line.

"There is ... a huge value to customers, recent figures report that Irish customers spend 11.2 minutes queuing daily to pay for low-value purchases," Wilson said. "Contactless payments help eliminate these lengthy queues."

Will contactless card machines enter the US? 
It is still too early to tell if the technology will be integrated into the U.S. market. Recent studies by MasterCard found contactless payments could increase consumer adoption of mobile payments and boost credit card use. But smart chip-enabled cards are at the heart of contactless terminal technology, and until EMV cards gain widespread acceptance, contactless card machines may not come to the U.S.

Regardless, consumers continue to reach for plastic at the point of sale and it remains essential for U.S. small- and medium-sized businesses to accept credit cards to ensure customer satisfaction.

Nexus: G-WEBCD5