In the race to pay, mobile wallets win

Every weekend, when Pierre Houle works the brunch shift at Olea, a neighbourhood restaurant in San Francisco, many customers want to split the tab on multiple credit cards, a process that takes much longer than it used to.

For waiters like Houle, diners going Dutch is nothing new. But now he has to take each of the credit cards, insert them into a chip reader and wait about 10 seconds for every transaction to process. In the past, he could swipe a card, wait a few seconds, print out the receipt and get going.

“It isn’t much, but in the restaurant world it can be enormous,” he said. “I have to wait there, and I can’t go check on something else. You need to move all the time when you do a job like that.”

Many merchants and retail workers are watching their lives play in slow motion when they process credit cards. To combat fraudulent transactions, the retail industry is shifting from the traditional magnetic stripe toward tiny computer chips embedded inside cards.

The chip technology, known as EMV (for Europay, MasterCard and Visa) has been around for decades in Europe. But starting last October in the United States, banks pushed the liability of purchases made with counterfeit credit cards onto merchants. That means if a criminal swipes a counterfeit credit card to buy something, the merchant has to pay for it.
The sweeping change has compelled many retailers to upgrade their equipment to read chips, which have stronger security than the easy-to-forge magnetic stripe. By the end of this year, about 80 percent of all credit cards in the United States should include chips, according to a new report by fraud prevention company Iovation and research firm Aite Group.

The chip initially may annoy consumers. For most chip transactions, you have to dip the credit card into a slot and wait for the transaction to be approved before you can remove it and scribble your signature.

Mobile payments could be a quicker alternative. Some of the biggest tech companies — Apple, Google and Samsung Electronics — released mobile wallet technologies in the past two years, although they are still a niche product. In the United States, only 0.2 percent of all in-store sales were made with phones last year, according to a survey by eMarketer, a research firm.

“Contrary to what Tim Cook said when Apple rolled out Apple Pay, consumers have been swiping their cards for a long time and it’s not that hard,” said Julie Conroy, a research director for the Aite Group.

I tested chip cards and each of the mobile payments services in three different stores: Walgreens, BevMo and Nancy Boy, a small beauty supply store in San Francisco. I inserted a chip card or tapped a phone and timed how long it took each transaction to be approved and start printing a receipt. The results varied slightly, but the mobile wallets were generally much faster than the chip.

At Walgreens, after I inserted a chip card, the transaction took 8 seconds before a receipt started printing; Apple Pay and Samsung Pay took 3 seconds; and Android Pay (Google’s service) took 7 seconds. At BevMo, the chip payment took 10 seconds; Samsung Pay took 4 seconds and Android Pay and Apple Pay each took 5 seconds. At Nancy Boy, the chip took 8 seconds, and all the mobile payment services tied at 2.4 seconds.

What is happening with the chip to make it so slow? When you dip in the card, the chip generates a one-time code, which is sent to the bank over a network. The bank confirms the code and sends verification back to the terminal. With mobile wallets, the same thing is basically happening in the background. They generate one-time tokens that are sent out and approved by the banks.

Stephanie Ericksen, a Visa executive who works on security solutions for new payment technologies, says the sluggishness of the chip is largely a perception issue. The actual transaction time behind a mobile payment and a chip card is the same.

But with the chip, most merchant terminals require you to leave the card inside the reader until the transaction is complete and wait for a screen to tell you that you can remove the card. With the mobile payments, you can just tap the phone, and there is no extra screen telling you to remove the phone, which partly explains why the transaction appears to move along more quickly.

Visa is addressing the perception of sluggish transactions with Quick Chip. It is basically a coming software upgrade that will allow the terminals to instruct the customer to dip the card and remove it right away.

Mobile wallets feel faster, more convenient and less awkward to use than the chip, so you should use them whenever possible. The caveat, of course, is that not every merchant that takes credit cards also accepts mobile payments.

To see if the wallet is supported at a store, you will have to look out for Apple Pay or Android Pay logos on cash registers, or a logo of a hand holding a card in front of a wireless signal, which means contactless payments are supported.

That brings us to the differences among the mobile wallets. They all work about the same — take your phone out, enter your passcode or fingerprint and tap the terminal — and they have their pros and cons.

Samsung Pay is accepted by the most merchants because it uses magnetic secure transmission, a technology that emits a magnetic signal to mimic the magnetic stripe, meaning it can be used on most credit-card readers. Samsung Pay also supports payments made wirelessly with near-field communications, for NFC, a technology that enables devices to exchange information wirelessly over short distances.

Apple Pay and Android Pay can make payments over terminals that have NFC or inside apps that support them, like Uber or DoorDash.

Apple Pay is supported by more banks than the Samsung and Android wallets. (I was surprised, for instance, that I could not add a Chase card to Android Pay). Android Pay’s advantage is it is available on the broadest array of devices. It can run on most Android phones that support NFC, whereas Samsung Pay can only be installed on Samsung phones and Apple Pay can only run on iPhones and the Apple Watch.

In a statement, Samsung said Samsung Pay was the most accepted mobile payment service and it “dramatically decreases opportunities for fraud.” Google’s senior director for Android Pay, Pali Bhat, said, “We want Android Pay to be available everywhere, and everywhere means as many devices as we can support.”

Jennifer Bailey, vice president of Apple Pay, said, “Users tell us they love the convenience and speed of paying with their iPhone or Apple Watch.”

In rare cases, there can be a long wait before you take your chip card back. Houle, the waiter, also works part time at the beauty supply store Nancy Boy. He recounted an incident in the store when he dipped a chip card for a customer who left before he could hand it back. He tracked her down on Facebook and mailed it to her in New York three days later.

“It was my fault as much as hers,” he said.