JAMAICAN merchants are increasingly refusing to accept digital wallets and contactless payment methods due to concerns over fraud and theft, despite efforts by banks and fintech players to promote these services.

A check of retailers in Kingston’s Corporate Area, including Fontana and Progressive Grocers, revealed signs indicating, “Digital wallet payments not accepted.” The move may catch some consumers off guard, given the growing popularity of mobile payment services such as Google Wallet, Samsung Wallet, and Apple Pay.

Jamaican merchants are pushing back against digital wallets just as NCB Pay, a mobile application launched by National Commercial Bank Jamaica Limited (NCBJ) nearly two years ago, seeks to expand its user base. Separately, Bank of Nova Scotia Jamaica Limited (BNSJ), the country’s second-largest lender, plans to introduce Apple Pay in 2025, pending further testing.

Fontana, when contacted by the Jamaica Observer, cited fraud concerns and inadequate guidance from banks as reasons for blocking contactless digital payments at its point-of-sale terminals.

“We used to take [digital wallets] but since then there have been a number of issues, and the banks are not clear on how to deal with this fraud — not like the credit cards. So until this is rectified we have to protect ourselves. I know it’s not customer-friendly but it’s unavoidable right now,” Fontana said.

A notice in Progressive Foods store in Fairview, Montego Bay, late last year with the heading, “Phone tap Payments,” had a simple message for customers, “This form of payment is no longer acceptable. Sorry for the inconvenience this may have caused.”

The BusinessWeek reached out to Progress Grocers for a comment on the notice, but was unsuccessful.

A merchant operating a store at Sovereign Centre in Liguanea, St Andrew, said his business has implemented extra measures for contactless payments due to concerns over fraud and charge backs.

Charge backs occur when a cardholder’s bank requests a retailer’s bank to reimburse the customer for issues such as fraud, unauthorised payments, incorrect charges, or undelivered or faulty goods.

“It’s not against policy [to tap your card], and they shouldn’t have phrased it like that. We’ve had quite a few instances where persons say it’s not their card. Remember, if I take your card and tap it, they [staff] don’t know if it’s you or me. Quite a few people came, tapped the card, and then the bank calls and says, ‘John Brown is saying it’s not them.’ What they should have said is to ask you kindly to just show your ID to at least give them some comfort,” the merchant explained.

He added, “At the end of the day, that’s where the world is moving so we have to move with it, but we have to continue to put measures in place. Persons giving you a copy of their ID, so at least if there’s an issue we can say that it’s John that came.”

Merchants in areas such as Half-Way-Tree, St Andrew, told Business Observer that they have implemented policies prohibiting contactless payments, despite having point-of-sale terminals capable of facilitating such transactions.

Most commercial banks in Jamaica issue EMV-enabled cards, which allow customers to make contactless payments. An EMV card is a credit, debit, or prepaid card that has a microchip embedded in it. EMV stands for Europay, Mastercard, and Visa, the companies that created the standard.

Merchants’ concerns are largely driven by liability risks associated with fraudulent and disputed transactions. Although both PIN entry and contactless card transactions complete a purchase from the consumer’s perspective, they carry distinct liability implications for merchants in the event of a dispute. These liabilities vary depending on the merchant’s bank and adherence to Payment Card Industry (PCI) compliance guidelines.

Danielle Cameron Duncan, vice-president of payments and digital channels at NCBJ, said at NCB Financial Group’s investor briefing on November 15 that contactless payments offer enhanced security for consumers and merchants due to the underlying technology.

EMV-enabled cards generate one-time codes for each transaction at point-of-sale terminals, while mobile wallet payments utilise tokenisation, which replaces sensitive information with non-sensitive tokens for processing.

“It’s been years since we’ve actually had contactless enabled on our point-of-sale machines, and it took us years to really push cultural acceptance in the merchant base. There were a lot of concerns whether or not if they needed to have a transaction queried or reversed, if it would be any different. It’s the exact same process as if you had inserted the card into the point-of-sale machine. There’s no difference between tap [with card], inserting the card, and mobile app tap transactions. We’ve been doing a lot of work around educating merchants on that [point],” Cameron Duncan said.

NCBJ’s Cameron Duncan also noted that contactless transactions account for at least 30 per cent of the bank’s processed transactions, one of the highest rates in the Caribbean. As Jamaica’s largest commercial bank, NCBJ also dominates the point-of-sale (POS) market, providing both physical and digital terminals to merchants.

Bank of Jamaica (BOJ) Deputy Governor Natalie Haynes emphasised the importance of security and cybersecurity in electronic payments during the bank’s recent quarterly meeting when asked to comment on merchants declining to take payments through tap-to-pay methods.

“Any electronic payments that come into the bank’s sandbox to be tested has to satisfy minimum standards in terms of security, again, cybersecurity. We will require a third-party independent assessment of that product, so it has to meet minimum standards and assure us of the security there.”

Haynes further highlighted that credit card transactions adhere to minimum standards to mitigate cybersecurity risks.

According to BOJ retail payments data, 6.16 million debit and credit card transactions were processed in 2023, totalling $1.77 billion. In the first quarter of 2024, transaction volumes surged 33 per cent to 7.28 million, while transaction values rose 102 per cent to $794.63 million.

There is a lack of publicly available data on suspected or confirmed fraud within Jamaica’s financial system.

“In June of this year [2024] Visa announced reaching a milestone issuance of our 10th billion token globally. Tokens provide multiple layers of security behind the scenes by protecting sensitive account information. Tokens continue to be rolled out throughout the Caribbean to enable use cases like mobile wallets, and replacing cards on file at e-commerce sites with tokens. Also, consumers in the Caribbean continue to find that contactless transactions are fast, secure, and convenient, with adoption continuing to grow and representing more than 50 per cent of all transactions,” Visa said in an e-mail to the Business Observer.