US Payments – A rather disappointing experience…
5th September 2022
Over the past few weeks I have been lucky enough to go on a family road trip across 12 states on the US East and West Coast. As the home of many major payment brands from Visa to Mastercard, Stripe to Venmo, Apple to Amazon, I was looking forward to a bit of payments inspiration which I could bring back to Europe. However, as a payments nerd, my purchasing experience was (with some notable exceptions) rather disappointing and the process has brought into focus what we take for granted here in Europe.
To provide some colour to the issues I experienced, here are six examples. Typically, I was using my new(ish) Chase card loaded into my ApplePay wallet. In some cases I used the card itself which has no number on the front (PAN), and no signature panel on the back. In all these cases it was not just me who had a poor experience, but the merchant who was paying for the service also often lost out:
- Cafes: In many cafes we came across Toast These offered contactless acceptance, but then also required me to sign on the terminal. In many cases there were Square terminals where, after tapping, the merchant swivelled the screen round to allow for a tip and receipt emailing. This is an approach that many Europeans will find strange because the transaction value has already been authorised. In the US merchants are allowed to add up to 20% post-authorisation, and have the funds guaranteed, which may be a little alien to European customers given the protections provided by the PSD2.
- Restaurants: We did not come across any merchants offering pay-at-table terminals. They all had to take my card and (I think!) swipe the magstripe and then provide a signature on the till roll. This was despite the lack of a signature panel on the card. Given that I applied for the card online Chase don’t have a copy of my signature, even on an the application form. The same approach to post-authorisation/ authentication tipping can be followed by these merchants as with the contactless transactions above.
- Vending: At our first petrol station I attempted to use the pay-at-pump card terminal. After inserting my credit card (the Chase card would not work) and my PIN, I was asked to enter my Zip code. Despite friendly support from the assistant, there was no way round this issue, so we had to pre-purchase an amount of petrol in the store at every station in our journey. We had a similar experience in New York at the Metro, but luckily the assistant in the station provided a work around for the recurring Zip code issue.
- Accommodation: We stayed at a number of small motels on our journey. In many cases when we checked-in they took my card to take down the card details to support a pre-auth. On the first time we had this I passed across the Chase card and they had to hand it back due to the lack of a PAN (they did not want to use the PAN from my app). In one case the assistant started copying down the freephone number on the back of the card before I politely pointed out that it would probably not help him much.
- General Retail: In many of the shops there were issues with the speed of transactions. In one case there was a polite note that said “Please enter PIN slowly”. On a number of occasions I had to re-try contactless transactions with the teller asking me to leave my phone on the terminal for an extended period (often 3-4 seconds) before the transaction was authorised.
- Laundry: As we were on the road for a number of weeks, and we didn’t always have access to a washing machine, we used laundrettes on a number of occasions. I discovered that most launderettes still rely on ready access to quarters (in one case there was an app, but this was restricted to US users only). Given I have three children we typically needed two loads for both washing and drying. This requires a total of 40 (you read it right 40!) quarters to wash our clothes. You may be aware that the US is currently experiencing a coin shortage that means that many motel locations don’t have much change on hand which made the process even more interesting!
When I discussed these issues with some of my US colleagues they highlighted the issues of legacy terminals due of the size of the US market, and the fact that the problems are typically only experienced by foreigners. However, all the terminals I came into to contact with were modern, and almost all supported contactless. In addition, I was using card scheme brands which are based in the US, and work very well cross border here in Europe, so I don’t see that its either a network brand, or a terminal age issue. There are typically 75m tourists visiting the US each year and, according to the US National Travel and Tourism Office, year to date (January – May 2022) spending by international visitors was $55 billion. This looks like a pretty good reason to improve these processes.
There were, however, a couple of highlights that left a smile on my face which point the way for the payments market globally. The most notable of this was our visit to Disneyland in LA. In this case I downloaded the Disneyland app the day before we arrived and purchased a number of pre-arrival services all via ApplePay. We used the same app to buy lunch and dinner, again using ApplePay, selecting a pick-up time slot, and letting them know we were ready to pick-up. We could also use the app to scan a QR code on items in the shops which could again be purchased with ApplePay anywhere in the store with an email QR code to show to the teller on the way out as proof of purchase. All this worked very smoothly and added to our enjoyment of the 14 hours spent in the Disney universe.
Having now returned to the UK, I have been thinking about what this means for payments in Europe, and what lessons we can take from my experiences:
- First, we should never assume that all payment markets are the same. Every domestic payments market is different we should no more assume that the US will function the same way as here in Europe than Americans should think that Europe should follow the US’s lead. Payments is as much about embracing diversity as any other walk of life, and it is addressing this diversity which makes the payments market so interesting
- Second, we should stop beating ourselves up about the quality of our payment systems in Europe. We tend to forget how great a payments experience most Europeans have when using their card domestically or across the European region. I can use the credit and debit cards mobile wallet, in a consistent manner, for any value, across all sorts of context from supermarkets to restaurants to petrol stations. The European market is in fact the originator of much of global payments innovation from chips on cards, contactless, real time payments and open banking
- Third, this excellent experience presents the greatest barriers to any new European payment system. I have worked in the European payments market since 1999, first helping launch one of the first mobile banking services in Finland with Nokia. Throughout this period I have been involved in, or observed, the attempts to create a European payments brand. There has been much teeth gnashing and hair pulling about Europe’s failure to develop a credible offering through initiatives such as Monnet, the Berlin Group and most recently EPI. Given how well things are working today, and their relatively low cost, it probably makes sense for new efforts to focus on non-POS payment journeys e.g. high value payments.