A Blog by Jonathan Low


Dec 5, 2015

Trouble in the Checkout Line: Which Way To Pay?

The frustrations and complications are a short term problem for consumers and for some merchants. But they are a longer term opportunity for anyone who can develop a more comprehensive, even universal - and more convenient - standard.  JL

Robin Sidel reports in the Wall Street Journal:

A survey of 1,001 consumers conducted this month found that 36% didn’t know if they had a chip card. Nearly half of chip-card users were confused the first time they used it, and more than 60% thought the cashier didn’t know much about the process.
The choice at checkout used to be simple: Cash or credit?
Now consumers confront a dizzying array of payment possibilities: PIN or signature? Dip or swipe? Wave or tap? You really want to pay with your watch?
The holiday shopping season is shifting into top gear at a moment when the U.S. payments industry is in an unprecedented state of flux because of new technology. For consumers, it can all be pretty confusing.
Paula Wilkison of Germantown, Md., is among the millions of shoppers just getting accustomed to the new generation of chip-enabled cards that issuers began sending out earlier this year. But not all merchants have upgraded their terminals to accept the new technology, which requires consumers to dip their cards into a slot at the bottom of the terminal.
When Ms. Wilkison tried to dip her card at an Ulta Salon Cosmetics & Fragrance Inc. ULTA -1.17 % store earlier this month, a cashier waved her hand away and told her to swipe the card the old-fashioned way. An Ulta spokeswoman said the company will introduce chip terminals in the first half of 2016.
“I was a little annoyed,” says Ms. Wilkison. When she made a chip-card purchase at Target Corp. TGT 0.88 % a few days later, she first asked the cashier if she should dip or swipe. She was told to dip.
Target customers who use the new cards incorrectly are reprimanded with a buzzing noise, which caught Michael Moeser by surprise last month when he left his card in the slot too long.
“It was very loud. I thought it was my phone,” said Mr. Moeser, who is director of payments at consulting firm Javelin Strategy & Research.
The new cards are also creating minor delays at checkouts, potentially eating into the profits of merchants who need to get customers through the line as efficiently as possible. “We knew it was going to take a couple seconds more at checkout and we’re seeing that,” Target chief financial officer Cathy Smith said last week.
Merchants who don’t make the transition to chip cards can also find themselves on the hook for certain fraudulent transactions that used to be absorbed by the banks.
There hasn’t been this much upheaval in the checkout line since manual credit-card authorizations were phased out and replaced by computers in the 1980s. Magnifying the current confusion is that while the industry transitions to chip cards, merchants are also introducing a whole range of new technologies allowing consumers to pay using digital wallets, smartphones and other devices.
Some, such as Urban Outfitters Inc. URBN -6.33 %  and  Whole Foods Market Inc. WFM -0.52 %  let consumers pay by tapping their Apple phones to the payment terminal. But don’t try to use Apple Pay at Wal-Mart Stores Inc., WMT 0.72 % which isn’t equipped to handle the technology. If you have a Samsung SSNHZ 0.00 % phone, however, you can use the device at nearly any payment terminal.
Surveys show the adoption of those digital methods continues to be slow. The biggest source of confusion is the new chip cards.
The new cards contain a computer chip instead of relying on the traditional magnetic strip on the back of the plastic. The chip cards, which are widely already used around the world, make it more difficult for crooks to create counterfeit cards if they hack into a merchant’s payment system.
Although banks have issued hundreds of millions of chip cards so far, the cards represented just 30% of the plastic in circulation from the eight largest financial institutions as of June 30, according to a payment-industry group.
A survey of 1,001 consumers conducted this month by management-consulting firm Stax Inc. found that 36% didn’t even know if they had a chip card. Nearly half of chip-card users were confused the first time they used it, and more than 60% thought the cashier didn’t know much about the process.
And while some large merchants, such as Target and Wal-Mart, are processing chip transactions, many other merchants—from Bed Bath & Beyond Inc. BBBY -1.38 % to large regional grocery stores—don’t yet have the new technology. A representative for Bed Bath & Beyond said the retailer will start processing chip-card transactions during the first half of next year.
“Since it’s not universal, you’re bouncing back and forth between dipping and swiping and it’s confusing,” said Brett Conradt, a Stax consultant. He says he recently got befuddled when using a chip card at a self-service checkout lane in a Chicago drugstore and was “kind of standing there holding my card in the air.”
Even the stores that do accept chip cards aren’t consistent in their approach to guiding consumers. In some, the terminal’s payment screen directs customers through the process, while others rely on cashiers to do so.
David Okin says he has sometimes swiped his chip card when it should have been dipped, leading to a failed transaction and embarrassment at the checkout line.
“You have that five-second worry that your card was declined—and there are all these people on line behind you,” said the 24-year-old real-estate developer who lives in Manhattan.
Manning Field ran into a stumped cashier the first time he tried to pay for lunch with his Apple Watch in the corporate cafeteria of J.P. Morgan Chase JPM -0.80 % & Co.’s credit-card headquarters in Wilmington, Del.
“She said, ‘Hey, I don’t know how to do that. Can you just use your card?’ ” recalled Mr. Field, who is an executive director in marketing in the bank’s credit-card division.
He now pays with the watch frequently in the cafeteria, although “every now and then, you go up there and get a bagel in the morning and you get the eye roll that’s like ‘Why can’t you just pay like everybody else?’ ”


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