• Milos Dunjic

Are We Inching Toward Unified Contactless Kernel At POS?

Contactless / proximity payments are bringing speed and convenience to the checkout counter. Their usage skyrocketed when COVID-19 pandemic struck. It's hygienic, ultra-fast and convenient, especially suitable for transit payments and Quick Service Restaurants (QSRs) use cases.

Contactless payments are supported by all payment card schemes. MasterCard has PayPass, Visa has PayWave, American Express has ExpressPay, Discover has ZIP and JCB has JSpeedy, etc. This also includes support for NFC based mobile payments (mainly using so called 'NFC card emulation mode').

At the lowest architecture level, contactless payments are all built on top of the ISO 14443 standard. However at higher application levels all of the payment schemes have slightly different application protocol implementation optimizations and also within each of the payment scheme's specific implementations they all offer 2 different profiles / modes of operation which must be supported (mag stripe emulation and optimized-EMV)

It is a messy scenario for anyone trying to understand, introduce, rollout and support the contactless / NFC technology at the POS and presents high barrier for entry to the new players in the POS space.

What POS implementers and merchants must deal with currently is this

  1. For each card payment scheme, they must plan to go through separate certification process of the contactless POS kernel and to have budget to periodically re-certify it

  2. For each payment scheme, the POS kernel must automatically support 2 separate modes: mag stripe emulation and optimized EMV

  3. They must separately understand and validate each payment scheme implementation for potential vulnerabilities and mitigate those ... i.e. have budgets set aside for regular maintenance and upgrades

  4. They must understand how POS terminal handles failed contactless transactions for each payment scheme implementation and mode (due to card tearing at POS)

According to the latest EMVCo press release from May 9th 2022, currently, there are more than 20 different proprietary contactless kernels in use around the world. For each of these proprietary contactless kernels, POS vendors also have to potentially support 2 different mandatory modes of operation (mag stripe emulation + optimized EMV) ! That is potentially total of 40 different contactless protocol variations to support - all basically doing the exact same simple thing ... i.e. handle quick 'tap payment' at POS.

Here the EMVCo seems to be having an obvious opportunity for real innovation, by harmonizing and consolidating all these different contactless kernel implementations into one standard contactless protocol. That could dramatically simplify the POS technology stack, reduce the contactless / NFC electronic payment transaction deployment costs, improve cost of support and in the end significantly improve the contactless transaction economics.

On top of all those benefits, removing significant barriers to entry for new POS players would improve competition and focus energy of all those technology teams on implementing value added innovations, rather than just supporting the current state complexity.

Are we there yet? Back in 2019, that was one of my 'payment wishes' and 'crystal ball predictions' for 2020. Looks like I was off by couple of years, however, the quoted EMVCo press release from May 9th seems to be hinting that at least they may be moving in the right direction.

Time will tell how fast the industry can move. Definitely something to watch and cheer for.

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