Merchant Group Calls for Bold Action on Mobile Payments with EMV

A trade group representing more than 50 major U.S. merchants released a position paper on Monday calling on the payments industry to move resolutely toward mobile payments with near-field communication (NFC) capability and chip-and-PIN technology. The Merchant Advisory Group, based in Dallas, sent the five-page paper to card networks, major acquiring banks, and NACHA, the regulatory body for the automated clearing house association, says Dodd Roberts, president and chief executive of the group.

The paper, entitled “Pulling Open the Curtains on the Payment System: Merchant Advisory Group Recommendations on the Mobile Transformation Opportunity,” is intended to stimulate talks among banks, payment networks, and retailers in hopes of reaching consensus on specific technologies, Roberts says. “We’d like to start conversations, collaborative conversations with key stakeholders to map out the next few years in the payments industry in a thoughtful manner rather than piecemeal,” he says, noting that by establishing certainty of direction all players can avoid investing in the wrong technologies.

But the paper also advocates strong action on mobile payments incorporating NFC, an interactive technology that enables contactless point-of-sale payments with mobile phones, and EMV, a chip card standard that can potentially replace magnetic stripes with microchips and PINs. For example, the paper says payments players should “commit to bold moves to harness digital, mobile technology to solve long-standing problems.” Among a number of recommended actions, the paper calls on its readers to “move quickly and decisively to mobile NFC under EMV.” Indeed, it says, “a deliberate ‘forced march’ to EMV-based mobile NFC payments would be supported by many merchants—even though they shoulder a significant portion of deployment and conversion costs at the point of sale and in the back office.”

Moreover, while cautioning that “permanent governmental oversight would be bad in the long run,” the paper further calls on government regulators, including the Federal Reserve, to “create and endorse a regulatory road map” that would allow payments players to make investments without fear of “limitations or constraints that otherwise might emerge down the road.”

Roberts says the paper is also intended to stake out a position for merchants on emerging payments technologies. While NFC and EMV would impose significant systems and hardware costs on merchants, Roberts argues the paper will help give merchants a voice in how these technologies are shaped. “Things seem to evolve in payments and merchants traditionally haven’t had much input in that process,” he says. “We’ve been trying to promote the thought that merchants ought to have a seat at the table. The smartest way to proceed is for all stakeholders to have a seat at the table.”

The MAG paper comes in the wake of a series of cross-industry meetings this year sponsored by the Federal Reserve banks of Atlanta and Boston to discuss NFC. Though the MAG has participated in these meetings, Roberts says the position paper is not connected with them. Indeed, the group has been working on the paper for some time, collaborating on it with Steve Mott, a payments consultant and proprietor of Stamford, Conn.-based BetterBuyDesign. Roberts says the group had intended to release the document during its annual conference in October, but didn’t have it ready in time.

MAG members include Best Buy, CVS/Caremark, Dillard’s, The Home Depot, The Kroger Co., McDonald’s, Sears, Sprint, Wal-Mart, and a number of airlines and specialty merchants.