Visa uses carrots, sticks to boost mobile payment adoption

Visa is planning to roll out dual mode chips in it infrastructure in an effort to step up mobile payment adoption. Meanwhile, Visa is deploying a mix of carrots and sticks to get merchants on board.

Specifically, Visa is aiming to prepare payment infrastructure for NFC (near field communication) mobile payments. Google has pushed NFC payments and other mobile phone players are aiming to turn your smartphone into a wallet. Visa will support EMV and NFC. EMV, which stands for Europay, MasterCard and Visa, is a global standard for credit and debit payment cards. EMV has been popular abroad, but lags in the U.S. In a blog post, Visa said:

For several years, Visa has been talking with clients and merchants on this subject – and now more than ever before, we’re hearing confirmation that chip is the right direction for the U.S. Over the last year, for example, we’ve seen financial institutions issuing chip cards to international travelers. And some large merchants have already begun installing chip terminals.

Visa will also push dynamic authentication to overcome any security worries and encourage adoption. With dynamic authentication it would be hard to use a card at a point of sale system even if payment data is compromised. Visa will support personal identification numbers (PINs) and signatures---so called static authentication---but expects both to give way to dynamic authentication.

According to Visa the following initiatives will boost dynamic chip authentication adoption:

• Starting Oct. 1, 2012 Visa will expand its technology innovation program to the U.S. Merchants in the program can eliminate the requirement to prove that they are PCI data security compliant as long as 75 percent of Visa transactions come from chip enabled terminals. Given that PCI compliance can be a pain, Visa is betting that merchants will move to support mobile payment systems such as NFC.
• April 1, 2013 is a deadline for processors and sub-processors to support merchant chip transactions. Service providers will have to support additional data that's needed to verify that each transaction is unique.
• Shift liability for fraud. Visa said it will shift liability starting in Oct. 1, 2015. Today, point of sale fraud is absorbed by card issuers. If a merchant hasn't adopted contact chip terminals liability for fraud may shift to the merchant's acquirer. Fuel vendors will have an additional two years before liability shifts.

Those three items will serve as a stick for Visa to push mobile payment and contactless system adoption.