EMV And NFC Done Right: What The US Needs To Know

The explosive growth of mobile has taken its toll on retail payments in many parts of the globe. In Canada, technology players, retailers, banks and network operators are now competing to “own” mobile payments, says Linda Mantia, Executive Vice-President, Digital, Payments and Cards at RBC. With NFC on the upswing, Canada is one country that has held out as an example of how EMV and contactless payments are done right. In a recent interview with Mantia, MPD CEO Karen Webster asked what the U.S. could learn from Canada’s EMV and NFC success, what role RBC’s technologies have played in the journey, and what really has to happen to ignite mobile payments globally.

KW: Let’s start with the basics and level set our understanding of payments in the Canadian market. Give us a sense of the state of payments, generally, in Canada and what your crystal ball says for 2015.

LM: Retail payments is a highly competitive and rapidly evolving space in Canada, no different than anywhere else in the world. With merchant discontent, increased regulation, new intermediating and even disintermediating competition, there are a lot of challenges and opportunities. Canada is a global leader in payments, and within the country, RBC is the No. 1 payments company. We’ve been in the payments business for over 150 years and have long been at the forefront of emerging payments and mobile-based technologies.

The rapid growth in smartphones and mobile apps has changed how Canadians shop. Technology companies, retailers, banks and network operators are competing to own mobile payments. Incumbents like RBC are investing substantial time and money in ensuring we stay ahead of the competition. We are under pressure to optimize our products and services across an increasingly wide range of challenges.

KW: Canada is often held out as an example of EMV and contactless payments done right since the migration has gone smoothly and contactless payments is on the upswing. It helps to have a small number – e.g., not 12,000 financial institutions like we have in the U.S. – to wrangle, for sure, but what key lessons can the U.S. market take away from the success Canada, and that RBC has had with getting both technologies ignited?

LM: Mobile payments have long offered great promise, but until recently a lack of technological standards, lack of a clear business case and vague value propositions have limited major pilot projects.

Until recently, we didn’t know if our bet on NFC was right – we had ongoing debate about the last inch and whether it would be NFC, QR codes or Bluetooth or even flashes of light or sound. It wasn’t until U.S. issuers committed to their EMV migration and Apple put the NFC antenna in their newest phones that we knew NFC was going to be the standard.

We migrated to Chip over a decade ago and RBC led the way with the first chip card issued in 2003. When merchants upgraded their terminals, many chose to support contactless as well as chip and PIN. Today, over 30 percent of terminals are contactless enabled; more importantly, it’s the right terminals, the ones at high volume every day spend retailers by and large that are contactless enabled covering over 60 percent of payment volume.

Consumers are also using the terminals; today, over 16 percent of our transaction volume is contactless. We have the fundamental building blocks in place for mobile payments to take off.

The challenge, though, still remains at the point of sale – they are all hard coded with different limits, some at $50, some at $100; have different combinations of payment card acceptance, some PayPass only, some PayPass and Interac FLASH, some with PayWave only; and the cashier typically hasn’t been educated about what works, when and why.

The takeaway: be bold, make changes, create choice and keep clients’ needs top of mind. The key for a compelling payments service is to make life easier for consumers, and integrating payments into the platforms consumers normally use to interact with one another can do that. We know that we can’t clutter them with the wrong things. Our boundaries have always been ensuring that what we offer our clients is relevant to them. By following consumers on to these platforms, banks can support consumers a lot more effectively.

KW: Mobile wallets have languished everywhere in the world. Usage is still small. Based on your experience with mobile wallets, what do you think has to happen to ignite mobile payments? And, is it even possible unless there is ubiquity with all merchants?

LM: While adoption is low right now, mobile commerce is the future. Smartphones are always on us. We check we have them before we check what we have in our wallets. Our clients are no longer turning to their devices just for text, email, and voice – they’re turning to it for everything. We believe the key element to winning the market and igniting mobile payments is choice.

We also believe true innovation is about making sure we have the very best solution to meet the needs of the complete ecosystem – consumers, merchants, business-to-business. Many early mobile wallet solutions have been challenging experiences to get up and running. We first started experimenting in 2009 writing payment credentials to embedded secure elements and then to carrier SIM cards. It took us in a lab up to five minutes to provision a single payment card and some of our competitors’ solutions take up 60 minutes to provision if it works at all. If clients changed card products or received a new card because of expiry or fraud, they would have to provision all over again.

We created RBC Secure Cloud so our clients could provision very quickly, instantly have access to all of their payment cards, and never have to provision anything again. Our SIM-based solution provisions 98 percent of the time in fewer than two minutes, most in and around one minute, and our host card emulation solution provisions almost instantly.

During this phase of change, there are both opportunities and threats for merchants.  We understand they are already faced with many issues such as ensuring privacy, reducing fraud, and now faced with assessing the mobile commerce impact to their business.

It’s a complex world right now. There are so many moving parts and we understand that there is a lot of uncertainty. That’s why it is important to us during this time of flux, to take a balanced approach to the needs of all stakeholders in the system. We are in this together.

KW: Let’s talk about Apple Pay. What are your views on Apple Pay and its prospects in Canada, and in particular, its business model which takes a percentage of the transaction fee from issuers? How do you think Apple Pay will change the relationship between consumers and their banks and consumers and third parties? 

LM: Nearly 40 percent of Canadians use Apple phones and until now we haven’t been able to talk to them about mobile payment. While the launch of Apple Pay is unknown in Canada, it is of major interest to the industry and a good thing for consumers; it provides an easy way to pay with a client’s credit or debit card. The biggest call to action is that all of us issuing banks have, together with Apple and Android, is to try and improve the consistency of the client experience at the point of sale – ubiquity, consistency and predictability matters.

KW: What do issuers need to do in order to remain relevant in a digital world?

LM: Change is inevitable. Six different industries are vying to remake retail payments by leveraging mobile – but this is not a new concept to us. The banks and the payment networks have to work together. We need to solve the e-commerce or in-app challenge – this cannot be done by small groups of banks or by geography in a fractured way. We are talking about infrastructure and we need a good foundation or pathway to allow payments to securely travel through these new channels without inconveniencing clients.

Change also brings opportunity. We have always been committed to giving our customers choice to manage their finances and payments – and that won’t change with emerging technologies, it will only increase the number of options we can provide.

KW: How important is security, really, to the consumer?  They of course say that it is critical, yet they know that they are not on the hook if there is a problem. How does this dynamic influence the decisions that the ecosystem need to make in order to protect themselves in the event of breaches? What are you doing to keep your overall fraud levels in check – both in store and online?  How are solutions at RBC secure? 

LM: Consumers take security very seriously, especially when it comes to trusting a financial institution with their finances.

We take the privacy and security of clients very seriously and we think it’s one of the reasons people turn to a bank for their payment solution. We have always been committed to providing our customers with choice – the ability to choose how, when and where they want to bank with us without compromising the value of services and advice we provide or security. This is not a new concept to us.

To that end, it’s only natural to worry whether mobile payments are secure. And one should never take security claims at face value. So take the time to read up on what the security features are and how they work before you commit to any kind of digital wallet app. Most importantly, make sure it’s from a reputable company that stands behind its services.

RBC is firmly committed to safeguarding clients’ confidentiality and protecting personal, financial and business information. This commitment extends to our online services and any new technologies we employ.

Mobile payments are just as safe and secure as contactless credit or debit payments, as the RBC Online Banking Security Guarantee protects payments made with the RBC Wallet. And as when consumers use contactless cards, the phone never leaves their hand when making a mobile payment – they are always in control. All card information is stored remotely using the RBC Secure Cloud.

As a further security measure, when consumers add a card to their RBC Wallet, they are asked to create a unique passcode and will be prompted to enter this passcode whenever making a mobile payment purchase with that card.

KW: Let’s look ahead to the rest of 2015. What are the biggest changes that you see taking place in the Canadian market, and in the payments market as a whole?  Where are the biggest opportunities and challenges?

LM: Banks are traditionally involved in three lines of business: lending money, storing money and moving money. We all know that the latter is in the midst of a major upheaval with many companies causing consumers to think differently about commerce in general and therefore impacting both – retail and banking.

Mobile commerce is a competitive environment. To be a contender, we need to be where our clients are and give them choice: choice in how they pay, what they pay with and with the device of their choosing. With that, we have to think differently and address these threats.

In the next couple of years, we will see a convergence of mobile and online. We see the merchants point-of-sale changing in many ways to reflect e-commerce. We will see the consumer having the ability to go beyond just payments; the payment will simply be a means to an end.

The consumer will also have a single-stream solution that enables them to use their loyalty points (earn and redeem), access to gift cards online (add, reload, check balance), opt-in to merchant offers at retailers they are loyal to, digital receipts, etc. Ultimately, the consumer will never have to carry plastic or paper again.

We will continue the evolution on security in order to ensure the mobile phone or whatever the device becomes an identifier for that individual and this can transcend to other areas outside of financial institutions such as using your phone to carry your driver’s license.

Linda Mantia
Executive Vice President, Digital, Payments and Cards, RBC

Linda is the Executive Vice President of Digital, Payments and Cards for RBC. She has global responsibility for the strategic direction of RBC’s Personal and Business Credit Cards, Rewards and Partnership Programs, Merchant Strategies/ Moneris, online and mobile banking, as well as the enterprise Retail Payments Strategy and Innovation.

Linda joined RBC in 2003, as the SVP of the Innovation & Process Design teams. She then moved to London, England, as Chief Operating Officer of Global Private Banking. Most recently, Linda was Head of Enterprise Services and Chief Procurement Officer, accountable globally for Acquisition Integration, Procurement, Corporate Real Estate, Lean Six Sigma, Global Consulting, Business Process Outsourcing and Enterprise Program Management Office.

Linda is a member of the Personal and Commercial Banking Operating Committee and a member of the board of directors for Moneris Solutions, a leading North American payment processor. For two consecutive years, Linda was named one of Canada’s Top 100 Most Powerful Women by the Women’s Network: in 2013 she was recognized in the Corporate Executives category and in 2014, she was recognized in the Trailblazers & Trendsetters category. She was also named one of the Most Influential Women in Payments for 2014 by PaymentsSource and awarded the 2014 Women in Payments Award for Leadership by Women in Payments.

Prior to joining RBC, Linda was an Associate Principal for McKinsey & Company based in Canada, the U.S. and Australia and prior to that Linda was a partner at Davies, Ward & Beck specializing in corporate and securities law.

In the community, Linda is co-chairwoman of Greening Greater Toronto and is actively involved in leading various aspects related to Women Against Multiple Sclerosis (WAMS).