Analyst Corner

Should you do Apple Pay or EMV first?

Categories: Uncategorized

With Apple’s long awaited release of mobile payment option they titled Apple Pay, retailers are once again given another payment option to consider…one that comes with a higher income demographic than the broader US population.

So which should you do first? Adopt these new payment technologies from Apple, PayPal, MCX and others or plan for the coming EMV transition? What if I said, none of the above? At least not now.

The first thing that retailers should be doing is making sure their payment processor and their systems support Point to Point or End to End Encryption. This should be the first step for retailers and the only one that protects you from the data breaches that are plaguing the industry at the moment. Home Depot is just the latest in the long line.

If you are not encrypting the data in your transactions…you’re next.

Second, after encryption, you want to make sure that your payment engine supports tokenization. Together, these two technologies protect the consumer and your exposure regardless of whether the transaction is mobile, online, or at the store level. Essentially, this means you are building a payment infrastructure for where your business is going, not where it has been.

The decision from there on Apple Pay or EMV is really up to the type of retailer and the fraud rate you are experiencing now. Since there is no agreed-to standard as yet for EMV in the US, and the current planned implementation is Chip and Signature, not Chip and PIN like the rest of the world, the only thing EMV really resolves for you is that the card presented is a real card, not that the user is authorized. Worse still, none of the cardmember data is encrypted and protected unless you as the retailer have End to End encryption in place. Further, EMV does nothing or online or mobile transactions.

Apple Pay obviously does provide protection. The one time use number, the fact that the cardmember information is never exposed to cashiers or your system, and that there will be an option for online transactions means it is better than the version of EMV being proposed, but unfortunately it is limited only to iPhone users at the store level. So unless you are willing to reduce your potential market to only Apple iPhone users, this solution is at best a part solution.

Bottom Line, make sure your systems are encrypted and tokenized. Those are first and only priorities for you in payments until they are complete. Then decisions on acceptance of mobile wallets and support of EMV may make sense from there.

If IHL can help you with any of these areas or a presentation to your customers on the topics that makes sense, please contact us or 1-615-591-2955.