Payments Today and Tomorrow: Updates and Predictions

When it comes to payments in the hospitality sector, the adage: "The more things change, the more they stay the same," clearly doesn’t ring true. Guests’ needs continue to evolve, creating new payment technology-related opportunities and imperatives. Even long- standing — or somewhat long-standing — obstacles on the path to payment technology implementation are starting to give way. Impediments to wider-spread mobile wallet acceptance remain — but change is coming. Some of these stumbling blocks originate with mobile wallet providers, whose use of NFC rather than QR codes as an enabling technology has proven problematic. “This (approach) has, so far, required the adoption of new hardware by merchants, some of whom have just finished deploying EMV hardware and don’t have the appetite to deploy NFC- or Bluetooth-enabled hardware,” says John Spencer, managing director and global industry lead, hospitality at Accenture. Despite this, the appetite for mobile payment options is impacting restaurant investments. According to Hospitality Technology’s 2019 POS Software Trend Report, enabling new payment options was a top driver for POS software upgrades in 2019 for 53% of restaurants. More than half of restaurateurs surveyed (56%) said that mobile wallet acceptance was key feature for next POS purchases. Operator concerns about issues like control and data security have slowed implementation, sources note. However, the inclination to embrace mobile wallets (and apps) is increasing as solution providers address these issues, states Bottomline Technologies. Among other factors that have created obstacles to widespread mobile wallet adoption, many mobile wallets are tied to a proprietary or closed payments ecosystem. Consequently, they cannot provide the seamless, unified, cross-channel payment experience guests demand, according to Semafone. Additionally, sources say, some consumers still think using a mobile wallet is no easier than swiping or inserting a credit card and do not see the value or incentive in doing so. Many are either limited in their mobile wallet adoption by the type of mobile device they own or overwhelmed by selecting from a myriad of available options. Some consumers object to taking the time to sign up to use multiple mobile wallets and to register the necessary credit card(s). Payment gateway and data security solutions providers such as Merchant Link believe the virtualization of credit cards — and in turn, decreased use of its traditional plastic counterpart — will spur mobile wallet acceptance among consumers. As consumer adoption of mobile wallet increases, the company and other sources predict, operators will follow suit. The somewhat bumpy road to EMV adoption put a glitch in payment innovation among restaurants and hotels. However, as with mobile wallet acceptance, the tide is turning. Myriad problems with compatibility, certifications and updates that caused service outages and terminal errors delayed the adoption of other technologies while merchants of all stripes wrestled with achieving EMV compliance requirements, according to Priority Technology Holdings. Some slowed down the pace at which they were considering new technology and restaurant/hotel technology innovation because they did not believe their businesses would be ready for such change until EMV compliance issues could be ironed out. Some remain in that mindset, contend Priority and other payment industry players. Figures from the U.S. Payments Forum indicate that chip-on-chip transactions comprise 60% of overall transaction volumes in the U.S., and Randy Vanderhoof, director, foresees an uptick going forward. “It’s true that some merchants were stymied in their payment innovation by the cost of moving to EMV-compliant equipment,” Vanderhoof says. “However, many got around that by making other investments in new technology that integrates with and supports EMV and therefore made the cost more justifiable — for example, loyalty and order-ahead solutions and location-based services. We’re still seeing this — and will see more.” Contactless payment technology has the power to reshape payment innovation. Visa considers contactless technology the next payment evolution in the U.S. and perceives cardholders and merchants as quickly acknowledging its advantages — increased speed of service, operational efficiency, and a simple, yet secure consumer experience. A total of 100 million Visa contactless cards are projected to be in circulation in the U.S. market by the end of 2019; that number is expected to reach 300 million by the end of 2020. Accenture’s Spencer concurs. “Contactless technology is a significant move forward toward frictionless payments and frictionless travel,” he asserts. The fact that all contact point-of-sale equipment can now read contactless cards will make it easier for vendors to create new contactless payment applications and for restaurants and hotels to embrace them, Elavon believes. According to the company, contactless payment technology should support a new restaurant model wherein operators will not even need employees to accept payments. Elavon is involved in a pilot-test of a self-service café concept under whose umbrella loyalty cards are linked with credit cards. Customers swipe a registered loyalty card at the POS to pay for their food; charges for the meal are then billed to the associated credit card. Meanwhile, Merchant Link anticipates that contactless payment technology will lead not only to wider-spread implementation of pay-at-the-table solutions, but also to innovation in pay-at-the-table technology as the business case expands. For example, one next step for O'Charley's Restaurant & Bar will entail implementing contactless pay-at-the-table technology beyond the four walls of about 175 restaurants in 17 Southeastern and Midwestern states. The technology will be used to accept payments from customers arriving for curbside order pickup. “We think there is a strong business case for and benefit to using ‘pay-at-the-table’ to improve the customer experience curbside,” states Craig Barber, O’Charley’s president and CEO. Ingenico foresees considerable interest in contactless technology-driven pay-at-the-table applications among hotel operators with full-service on-property restaurants. The vendor is currently working with some table service brands on pay-at-the-table implementation projects. Visa holds that consumer education and awareness will play a major role in driving contactless payment adoption in the U.S. The onus, a Visa executive says, is and will be on stakeholders across the payment and hospitality industries to work together on standardizing tap-and-pay branding at the point-of-sale (so consumers know the option is available), train employees and offer turnkey marketing materials. Through this education, Visa contends, consumers can be also be made aware that contactless cards harness the same dynamic security as traditional contact EMV cards, ensuring that their information cannot be used to create counterfeit cards if it is stolen. Education notwithstanding, contactless technology implementation and development won’t necessarily mushroom overnight. Vanderhoof says the rest of this year (and early next year) will feature a focus on more dual-interface cards coming to the market and more merchants becoming enabled to accept them. Much of the action should occur in metropolitan areas, where larger public transportation systems are moving to EMV contactless payment systems. The trickle-down effect of this action will be felt in the hospitality sector, Vanderhoof says. Global travelers’ preference for options like Alipay from Alibaba Group Holding and WeChat Pay from Tencent Holdings will significantly impact restaurants and hotels in markets that are heavily frequented by visitors from abroad. Operators will be compelled to expand the breadth of platforms through which they accept payments in order to remain competitive and cultivate global travelers’ business. This means allowing visitors to pay for lodging and meals however they are most comfortable — including with “foreign” apps, Spencer asserts. “Alipay and WeChat Pay control a large dollar volume of transactions, and thus hotels and restaurants that are in markets frequented by Chinese tourists need to look toward acceptance,” he says. He adds that operators must bear in mind that “other countries in Asia and Europe have rapidly growing mobile wallet alternatives. Hospitality players need to understand where tourists from these nations are headed and be prepared to accept those payment methods where appropriate.” Marriott International recently completed an initiative to add Alipay acceptance capabilities in 1,500 (23%) of its 6,500 properties around the world. Two-thirds of these hotels are outside the Asia Pacific, in the U.S., Canada and “high-demand” markets in the Middle East. In a statement, Marriott’s Craig Smith, president and managing director, Asia-Pacific region, likens making Alipay available to Chinese travelers to installing Visa, Mastercard and American Express brand mobile payment apps in foreign hotels that cater to U.S. tourists abroad. He adds that Marriott’s efforts to bring Chinese payment apps to Chinese consumers outside mainland China stem from a push to create a better hotel experience for Chinese customers. With this in mind, the hotel chain remains open to integrating other apps of its type, including WeChat Pay, into its payments infrastructure. Operators that integrate Alipay, WeChat Pay and the like may experience a short-term need to implement additional PIN entry hardware and applications on-premise and in-app to support these payment types, predicts ACI Worldwide. In the longer term, the apps will most likely be supported by major POS hardware vendors, enabling multiple payment options. Enabling payments for a global and digital customer base will require more than embracing Alipay, WeChat Pay and innovations like them. Whether through contactless technology, the integration of payments with other apps such as online ordering and loyalty, or other means, operators will need to make payments frictionless to enable them for a global and digital customer base, notes Priority Technology Holdings and other sources. A payment infrastructure that allows for mobile application-based payments to be accepted through multiple channels is a must as well, according to Infinicept and several other vendors interviewed for this report. On the global customer side, restaurants and hotels will likely be compelled to also introduce such future-ready solutions as dynamic pricing, which according to First Data is gaining traction online and in-person based on the benefits it offers to hospitality players and consumers alike. Dynamic pricing gives foreign travelers the choice to pay in their native currency while eliminating the foreign currency risk for merchants. For example, in a dynamic pricing scenario, guests from abroad see prices in their native currency when booking hotels abroad, creating a more comfortable and familiar experience. Merchant Link is launching dynamic currency conversion with an integration of Alipay and WeChat Pay. New payment security challenges loom large. EMV has greatly improved the security of card present payments. However, Trustwave predicts that as contactless payment technology takes hold, perpetrators will develop a new breed of skimmers to execute data theft schemes. Vendors will need to begin innovating to stem the tide, and operators will be forced to keep a sharper eye on point of sale hardware to minimize the threat of point of sale systems infiltration in the interim. What’s more, the initial thrust of the EMV rollout saw a push to educate merchants on the key benefit of EMV technology — namely, that the embedded chip functions as a deterrent to fraud in card-present merchant environments. However, ControlScan says a misconception has taken hold, with operators assuming that EMV secures the entire payment process. While the misconception has yet to stop vendors from innovating on the payment security side, it has generated a false sense of security among some end-users, leaving operations vulnerable to data breach. ControlScan recommends that when restaurants and hotels migrate to EMV-compliant equipment, that they meet security challenges by seeking out solutions that perform hardware encryption of cardholder data and are P2PE-validated. This in turn improves security posture.

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