Payments

4G and EMV upgrades complete?

Self-service equipment operators need to upgrade to 4G to continue offering contactless payments when the 2G and 3G networks are discontinued. They also need to make sure payment equipment is EMV compliant to enable contactless transactions and avoid chargebacks.

Image provided by iStock.

September 1, 2021 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

One of the most promising technologies facing the self services industry is also one of the most challenging: connectivity.

Improved connectivity speed makes transactions faster and improves customer service, but the infrastructure supporting connectivity is transitioning to a new generation: 5G. Hence, self-service equipment operators need to make sure the networks they rely on will continue to support their payment services.

These challenges and opportunities were explored during a session, "You Survived 4G and EMV (Maybe), Now What?" during the recent National Automatic Merchandising Association show at the Ernest N. Morial Convention Center in New Orleans. Michael Kasavana, Ph.D., the NAMA endowed professor emeritus, moderated the session.

The good news is that operators using the current 4G and 4G LTE networks can rest assured the networks will continue to support their payment services, despite the advent of 5G.

"We have not yet 'survived' 4G," said panelist Wayne Vandekraak, chief sales officer, OptConnect, a wireless services provider which manages about 230,000 connections to self-service equipment in finance, retail, energy and industrial accounts.

Meanwhile, OptConnect has about 30,000 3G upgrades to 4G to do.

Cellular history

Vandekraak began the session with an overview of cellular network history.

In 1973, the first cellular call was made on a 1G (first generation) network, at 2.4 kilobits per second.

To download an average Apple iPhone movie in 1985 on a 1G phone would have taken 157 days, and it took 10 hours to charge a battery for a 30-minute phone call.

In the 1990s, 2G emerged. You could look at news bits at a speed of 50 kilobits per second, which would have taken 142 hours to download an Apple iPhone movie.

Then 3G came in the early 2000s. At around 385 kilobits per second, 3G brought an important change since it allowed machine-to-machine communication. The movie download would have taken about five hours.

"Suddenly that revolutionized the industry and we could do all sorts of things, including connecting vending machines, certain types of micro markets, ATMs," Vandekraak said. "3G was a work horse for a long, long time."

Then came the Internet of Things that required even faster transaction speed.

"Cellular communication and consumer communication have more requirements; they wanted to do more with their phones," he said.

4G and 4G LTE further change the playing field

4G emerged in the 2000-teens. Some carriers experimented with protocols, including 4G long term evolution, known as LTE. 4G and 4G LTE can support most self-service transactions efficiently.

"We're going to have it for a long time to come," Vandekraak said.

While the next generation, 5G, is getting a lot of attention, it doesn't cause the death of 4G and 4G LTE, Vandekraak said. 5Ge is specifically for smart cities and autonomous vehicles.

"For everything that we do including consumer communication, especially in the IOT business…connecting vending machines, connecting micro markets…we're going to be using 4G LTE for a very long time to come," he said, adding that it will last most likely into the 2030s.

5G is nonetheless relevant to self-service equipment because the network carriers want to discontinue 2G and 3G to enable 5G. This is because there are limited radio frequencies available.

"In order to make room for 5G the carriers have announced that they're going to discontinue the use of 2G and 3G," Vandekraak said.

2G and 3G to sunset

Sprint's sunset date for 2G and 3G is Dec. 31 2021, while AT&T's sunset date is Feb. 22, 2022 and Verizon's is Dec. 31, 2022.

"They're going to take those 2G and 3G radios down to make room for a 5G frequency and your device will go dark," Vandekraak said. "We are already starting to see it happen."

There is no way to know for sure when the carriers will actually stop operating the 2G and 3G networks, he said.

"They obviously can't upgrade every single tower the night of Dec. 31s," he said. "They are probably going to support it for a period of time,"

Over the next year and a half the country will look like a "Swiss cheese" of 2G and 3G devices.

Carly Furman of Nayax discusses the importance of EMV for contactless transactions, flanked by moderator Michael Kasavana.

"Get ahead of the curve," Vandekraak said. "If you have maintenance that needs to be done on a vending machine or a micro market, put a 4G LTE device in. That device is going to be good for at least another 10-plus years."

EMV compliance

Panelist Carly Furman, Nayax North America CEO, urged her listeners to go a step beyond upgrading to 4G and make sure payment equipment is EMV compliant.

"Now is the time to also get ahead of the curve with EMV and not just upgrade to 4G," Furman said.

EMV certification levels 1 and 2 pertain to the device itself while level 3 certifies the device to take payment with a processing partner bank.

The EMV chip creates a dynamic one-time code for each transaction.

"Therefore it's substantially more secure," she said. The information on the card is encrypted and creates a one-time code each time the card is presented for payment, making it harder for someone to steal that information.

In 2022, all contactless transactions must be on an enabled EMV certified and enabled card reader, Furman said.

The consumer presents their card on a reader and inserts it or taps it against the device and a one-time code is created. The encrypted information is then sent to PCI-certified servers, then transmitted to the certified processing bank.

Just because a consumer is currently making contactless payments does not mean they will be able to continue to do so on machines if the vending operator has not upgraded his or her devices to EMV.

"That's because legacy readers in the field can still take NFC," she said. "Not all readers in the field are actually accepting contactless transactions.

"Those devices in the field are not always upgradable over the air to allow EMV transactions," she said.

"Once the card brand disallows mag swipe contactless payment, it means the only way someone will be able to pay on that terminal is if you were swiping the card. If they go to tap that card or to pay with mobile wallet it will be blocked and the transaction will be rejected."

Avoid chargebacks

If a customer pays swiping an EMV card on a non-EMV certified device, a chargeback and chargeback fee gets passed on to the operator or the payment services provider. The operator stands to lose the chargebacks plus the 20-30% they are likely to receive in contactless sales.

If you are currently accepting EMV contactless, Furman said you could lose enough revenue after the EMV contactless mandate in early 2022 that would have otherwise paid the cost of upgrading to a fully EMV-certified, enabled device in a few months.

"EMV is a must," Furman said.

Contactless is the largest growth area of payment types, she said. Contactless transactions in 2017 were 1.5% of the total, she said, compared to 20% on average in 2021.

Some operators are seeing 30%-40% of all transactions contactless.

'Yes' on cryptocurrency

Asked if the industry should accept cryptocurrency, both panelists said "yes."

Cryptocurrency can easily be transacted in unattended settings, Furman said, along with other alternative payments such as payment apps and stored value cards.

"We want to embrace all of these payment methods," she said.

Vanderkraak added there has been a surge in cryptocurrency ATMs, which allows a consumer to fund a cryptocurrency account at the ATM. There has also been a growth in equipment that accepts cryptocurrency.

Photo courtesy of NAMA.