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Here’s Why J.C. Penney Walked Away From Contactless Payments

J.C. Penney has switched off all contactless payment options, in part because it still uses legacy point-of-sale terminals.

The retailer’s POS terminals are able to read magnetic stripe data, J.C. Penney told TechCrunch, but it wasn’t ready to actively support the new EMV contactless chip transactions. The decision is believed to impact all contactless payment options, from Apple Pay to Google Pay.

The shift to the new EMV (EMV is the acronym for the global payment standard for computer-chip enabled cards set by Europay, Mastercard and Visa) chip cards came as a result of an April 13, 2019 deadline set by Visa back in October 2017. The newer credit cards using the EMV standard are considered more secure than the older cards using magnetic stripe data (MSD), as EMV uses one-time encrypted text called a cryptogram to provide payment security.

On Twitter Friday, the retailer said, “JCPenney chose to suspend all contactless payment options until a later date due to technology changes. Customers can still complete transactions by inserting or swiping physical credit cards at point-of-sale terminals, an option employed by the vast majority of JCPenney shoppers.” In other tweets, J.C. Penney apologized for the inconvenience and said it would review shoppers’ feedback about the move.

J.C. Penney—which first started testing the Apple Pay option in 2015 before rolling it out to all U.S. stores in 2017—elected to not provide any advance notice to customers of its decision to drop the option, and consumers confused by the seeming backtrack where technology is concerned, are promising to stop shopping Penney’s.

On Monday, one shopper at the mass market retailer tweeted: “I avoid cash and only carry one emergency credit card which I intentionally never use. So now [J.C. Penney has] no way to get money from me because they’re dropped #ApplePay.” And another said: “And some retailers wonder why they can’t keep up and start failing. Removing a highly effective and secure payment instrument is not the way to go…” On Tuesday, another tweet read: “And I have made the decision to drop J.C. Penney from my shopping options. I apologize for any inconvenience.”

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J.C. Penney, which has been struggling the last few quarters, left open the possibility that it might revisit its decision down the road, but that would also involve a capital expenditure to upgrade both its in-store technology and its internal processing systems for both brick-and-mortar and online transactions.

Whether that’s actually feasible any time soon may depend on whether the mass retailer can pull off an effective turnaround strategy. Last fall the company hired Jill Soltau as chief executive officer, and her plan is to refocus the retailer’s merchandise strategy so there’s a greater emphasis on softlines, like women’s apparel and home soft goods. That has led to a move away from low-margin categories like appliances and furniture.

In February, J.C. Penney pulled off a fourth quarter earnings surprise that bested Wall Street’s adjusted diluted earnings expectations by 7 cents. It also met revenue estimates of $3.79 billion for the quarter ended Feb. 2, although that also represented an 8.4 percent decline from year-ago revenues. The retailer at the time did note that it expects “free cash flow to be positive for fiscal year 2019.”