US Payments Forum Quarterly Market Snapshot

U.S. Payments Forum

PRINCETON JUNCTION, N.J., Aug. 11, 2021 -- The U.S. Payments Forum today released its latest Market Snapshot. It provides an overview of the state of the industry, including the persistent uptick in contactless payment methods in a post-COVID climate, the significant successes in EMV implementation in the petroleum industry, how the payment industry is responding to the chip supply shortage, and current Forum priorities and projects.

“As the nation reopens post-pandemic, Forum members are highly engaged in sharing information about changes in payments volume and behaviors in recent months. Topics of the greatest interest were the persistence of strong contactless growth along with other new digital payment methods, a jump in transaction volume in the hardest hit business sectors, the rapid progress made in EMV at the pump since April's liability shift for fuel distributors and discussions around how to navigate the global shortage in semiconductor chips and the potential impact on card issuers," said Jason Bohrer, executive director of the U.S. Payments Forum.

State of the Market: In-store payments jump, contactless growth persists post-COVID
As the hardest-hit sectors of the economy re-open, in-store and travel related transactions are returning to near pre-pandemic levels, the payment networks reported.

In June, Mastercard for example saw year-over-year (YOY) spending growth of 55% in restaurants, 67% in department stores and 63% in apparel. In the U.S., Visa reported that travel was approaching 2019 levels in July, entertainment surpassed 2019 levels in May, and restaurant spending in Q3 of FY21 was over 20% above 2019 levels. American Express predicts global travel spending could return to 80% of pre-pandemic levels by the end of the year, and the U.S. will likely see a full consumer recovery in the travel sector in that same time frame.

The strong growth in contactless payments seen during the pandemic is not slowing down post-COVID, everyone agreed.

Visa reported in Q1 of FY21 that tap-to-pay was continuing to expand, representing almost two-thirds of all face-to-face transactions globally, excluding in the U.S. In Q3 of FY21, Visa stated that the U.S. had surpassed 370 million tap-to-pay-enabled cards, and the U.S. now has three cities above 25% face-to-face tap-to-pay penetration, New York, San Francisco and San Jose.

The pandemic-driven shift toward more use of digital payment methods continues to grow among consumers, with Ecommerce, 'buy now pay later' solutions, peer-to-peer transactions and mobile wallets all seeing increased volumes across the industry in 2021.

Three months after the April EMV liability shift for the petroleum industry took effect, many fuel distributors are on a fast track to widespread compliance. Despite strong headwinds from equipment and resource shortages, software and testing delays, and the pandemic, Parent Petroleum’s portfolio of over 400 independent locations reached 82% EMV compliance at the end of May and another large petroleum retailer shared that they have reached 90% contact EMV completion. EMV chip payment is growing rapidly, and Fiserv is observing 60% EMV chip versus 40% mag stripe transactions at the pump on the Accel network and a 50/50 split on STAR.

While challenges remain for the petroleum industry to further advance on equipping stores and expanding support for contactless, industry representatives credited the joint testing efforts spearheaded under the auspices of the U.S. Payment Forum’s Testing and Certification Working Committee for helping them get to where they are today. The c-store sector plays a significant role in the greater payments industry, making up over a half-trillion dollars in sales transactions in 2020, according to Parent Petroleum.

Another force driving contactless payment is the transportation industry. The Metropolitan Transportation Authority in New York reported contactless open payment acceptance was fully deployed as of the end of 2020. Since launch at the end of May 2019, they have over 111 million taps from cards issued in 153 countries and 4 million unique payment credentials. Digital wallets currently represent 69% of approved transactions compared to physical contactless cards.

Trending Topics: Impact of global shortage of chips, interest in EMV 3-D Secure grows
Surging demand for semiconductors worldwide is leading to shortages of chip supplies across all sectors, and the payment card industry is no exception. A confluence of factors created this situation according to Oliver Manahan at Infineon, including a spike in demand for personal electronics driven by work from home, supply chain disruptions during the pandemic and the rapidly growing needs of automobile manufacturers for chips as the industry recovers.

As it stands, more than one billion payment cards are at risk of not being issued through 2022, according to ABI research.

To help navigate through this challenge, Forum members are banding together to develop recommendations and best practices for all the stakeholders in the payments industry. A panel that included payment networks and semiconductor, chip card and terminal technology providers provided several recommendations on managing card and terminal supplies in the next months:

Keep an open line of communication with vendors and provide accurate, long range forecasts
Consider diversifying suppliers, keeping in mind how long it takes to on-board card providers
For contact-only products, consider migrating to dual interface chips, which are more likely to be available as foundries optimize production around larger, more profitable products
Avoid marketing programs or new branding initiatives that require re-issuance
Prioritize re-issuance around higher use card customers
A common thread through many presenters was a strong interest in EMV 3-D Secure for card not present transactions and especially the new 2.3 specification under review.

A panel that included EMVCo, W3C and the FIDO Alliance provided an update on their collaborative efforts to further improve security, compatibility, interoperability and ease of use of web payments. EMVCo has worked extensively with the FIDO Alliance to enable secure authentication across the payments ecosystem, including the use of FIDO data in EMV 3-D Secure messages to promote a frictionless payment experience for consumers and reduce fraud.

W3C updated attendees on Secure Payments Confirmation (SPC), which adds capabilities to browsers on top of FIDO-authentication to streamline strong customer authentication and transaction confirmation during Web payments. Although SPC is designed to be used with a variety of protocols, a current focus is integration with EMV 3-D Secure (ideally in version 2.3).

Forum Priorities: Managing chip card availability
As chip availability is becoming an important topic for the payments industry, the U.S. Payments Forum is in the process of forming a project team to examine developments and provide guidance to all stakeholders on managing through this period. The Forum exists as a means for cross-industry dialogue on challenges like these and together we will monitor its impact and work to provide resources and information on the chip supply issue as events unfold.

The forum is also focused on various implementation topics. One example is the recently launched 8-digit BIN Migration project. Through the Forum, industry leaders are collaborating to create informative resources on the background, payment network requirements and stakeholder impact of 8-digit BINs. The compilation of knowledge will serve acquirers, issuers, processors and merchants as they navigate the change.

In addition to the global chip supply issue and 8-digit BIN migration, the EMV Level 3 (L3) deadline is fast approaching. The Forum is taking steps to ensure industry-wide awareness and understanding during the L3 certification process, which aims to validate the integration of an EMV equipped terminal with merchant or bank systems to ensure end-to-end transaction acceptance. The U.S. Payments Forum Testing and Certification Working Committee has developed a white paper to aid in the first step in the EMV L3 certification process; completing the intake forms.

The Forum has numerous EMV and emerging technology-related education projects currently underway, including:

- white paper providing a baseline of EMV UAT test transactions to be used for user acceptance testing of newly implemented certification solutions.
- webinar on best practices for open EV payments implementation to assist EV charging providers and utility companies.
- resource on use cases, differences in merchant-presented vs. consumer-presented QR codes, and considerations for implementation.
- white paper on technical options for debit routing when EMV 3-D Secure is being used.
- An educational resource on authentication methods for mobile in-app and remote payment transactions.
Resource Recap

The U.S. Payments Forum published the following resources over the past quarter:

- Card-on-File Tokenization Considerations: a resource providing an overview of different card-on-file tokenization options and stakeholder deliberations for each, including debit routing
- Payments Resource Brief: Data Integrity Fraud, a first-of-its-kind resource on fraud topics by the Forum Card-Not-Present (CNP) Fraud Working Committee [members only]

Organizations, associations, government agencies and individuals interested in participating in upcoming projects and initiatives can visit the Forum website to learn about how to become a member. For membership levels, benefits and the application, visit http://www.uspaymentsforum.org/membership/membership-benefits/.

About the U.S. Payments Forum
The U.S. Payments Forum is a cross-industry body focused on supporting the introduction and implementation of new and emerging technologies that protect the security of, and enhance opportunities for payment transactions within the U.S. The Forum is the only non-profit organization whose membership includes the whole payments ecosystem, ensuring that all stakeholders have the opportunity to coordinate, cooperate on, and have a voice in the future of the U.S. payments industry.