John Terenz.io

Payments in France: First Impressions

JT on 20170722

After spending over a month in Paris I have some interesting observations about the payments market here via first-hand experiences and asking some locals about specific things. In no particular order here they are...

Contactless card payments are popular

If you've been to Europe one thing you may have noticed is that all credit card transactions take place in your presence. At restaurants, for example, your server will bring a terminal to your table and usually let you hold it in your hands while the authorization goes through. Of course this is due to the fact that non-US cardholders must provide their PINs, but I still really appreciate this ritual and the additional transparency in European payments. Also, holding the terminal in my hands is a fun technology experience. Unlike the US, the EMV chip has reigned in Europe for about 10 years, but like the US chip readers are still a bit slow here (maybe the stripe is such a distant memory in France people don't mind the slowness).

Before I left the US I replaced my Capital One QuickSilver card and the new copy I received had the contactless logo on the back. The last time I had a contactless card was many years ago on a Blue Cash card from Amex. That technology, at that time in the US, only seemed to work at a few big merchants like CVS, McDonalds, and maybe Whole Foods and it was not integrated with an EMV chip. Later it eventually disappeared from my Amex card. The first QuickSilver card I got did not have contactless either, but I was pleased to see it back on the new card (along with a new design) even though had no idea when I would be able to use it.

Contactless

Fast forward to France. On one of my first days, while standing in line for groceries, I noticed the person in front of me hold his card over the terminal and heard it beep. It generated the receipt quickly and the man was on his way. I tried it next and it also worked like a charm. It was so much faster than chip and the best part is that for Europeans no PIN is required and for me no signature (which as you will read below can also cause confusion). Contactless is a huge time saver and customers in France seem to be aware and gravitate towards it. I now notice it happening all the time and find that it is supported on most standard chip terminals (the wave logo comes up on the LCD when it's time to pay).

The one funny thing for me though was that I tried a few times to make contactless payments and the cashier told me that I couldn't and put the card in the chip reader for me. I learned later that contactless card transactions have tight limits, since they do not require PIN or signature and are thus more susceptible to fraud. In France the transaction must be €20 or less and you can perform up to three contactless payments per day. Other European countries seem to have similar limits. But for a small grocery run, a coffee, or a cheap bottle of wine contactless is the way to go.

Sans contactless
"Pas de sans contact" - contactless was not working on this reader :-(

Merchants are confused about signature for US cards

One way that I've been able to tell how many US tourists a merchant deals with is how aware they are of the fact that our cards don't use PINs but instead require a signature. At big clothing chains in Paris or restaurants that get a lot of visitors they seem to always have a pen ready and are used to this. At smaller shops or more off-the-beaten-path merchants, however, I usually see them stumble a little.

Two scenarios generally play out. The first is simply that the cashier doesn't have a pen around and needs to go find one. They often take the signature seriously and will seek out a pen even if it's causing a backup in the line and is for a small amount (which is why I now always try contactless first). I'm glad that some merchants take this seriously, but I also don't mind just skipping it for smaller transactions. This also seems to happen a lot. Sometimes the cashier is so unaware or cares so little about collecting my signature they just don't ask. For small stuff, using a chip to boot, this is totally fine with me and I am happy to save some time.

My favorite signature story has neither of these though. My wife and I have befriended a small wine merchant named Alexis who runs a little shop near our apartment. He's the sole proprietor and we see him several times per week when he helps us find a new French wine to try. I have generally paid him with my Amex using his chip terminal. His shop seems to be an independent franchise of a well-known brand so he does accept Amex. The first two or three times he collected my signature, but later something funny happened... Now every time I buy something there and the receipt comes out asking for a signature, Alexis just asks "Ok if I just sign for you? I know you now!" and he puts the receipt away, saving us both some time. I told him that of course this is fine and I completely trust him (his wine recommendations are always super solid). The best was last time when he told me that he usually draws stick figures on my receipts, but he hasn't showed me one yet!

Some ATMs are getting smarter

One of my least favorite things about European payments used to be that the ATMs always seemed to give you a lot of €50 notes, which are really inconvenient. They often annoy small merchants who don't want to break them (or can't). My first day in Paris I stopped at a BNP Paribas ATM, which is the largest bank in France and also owns Bank of the West in the US. I was super pleased to see that at least with this bank, they give you a choice of denominations now (albeit vague). You can get mostly small notes as long as the total withdrawl isn't too large! When you get €100, for instance, this generally results in four 10's and three 20's. Voilà!

Small bills

Amex acceptance is poor

My next observation is that while Amex seems to have greatly improved their acceptance in my previous hometown of San Francisco and perhaps across the US, it's not great in France. Generally fancier restaurants and large chains take it, but many smaller stores and more casual restaurants do not. I would say that half the time Amex is not accepted, the cashier knows this ahead of time and stops me, but half the time we learn together when the terminal rejects it. When the cashier or proprietor does know about Amex, they often comment on the high fees. Overall I probably get to use Amex on one out of every two card transactions in France.

I think part of this is that true "credit cards" in the sense that we know in the US are less common in France. Most people pay with cash or debit cards linked to their checking accounts. My friend did explain though that your debit card may have some credit built in. He personally has €2,000 of padding in case his checking account balance isn't sufficient. These cards, however, are mostly Visa or Mastercard branded. They do have French Amex cards, and they do have "real" credit cards in the sense that you pay out of band from your checking account, but they aren't popular. Related to that, credit card rewards aren't a big thing in France which removes some of the incentives to posses such a card. On the bright side, merchant fees in France are much lower on average than in the US and therefore I don't think you see price inflation like in the US. For someone with a US rewards card with no foreign exchange fees, this is great news since I get a portion of each transaction back without paying inflated prices.

Tax and tip are included

Most people who've traveled to Europe already know this, but one really nice thing is that for all purchases VAT (value-added tax) is included in all listed prices and at restaurants tipping is not expected. This is really nice because when you eat, for example, you can simply add the numbers you see on the menu and know exactly how much you're spending. As far as tipping goes, it does happen with locals, but it's generally really small. My French friend will leave around 2.5% if the service was amazing. One time for a four-person €200 dinner he left a €5 bill and said that it was perfect.

What fewer people from outside Europe may know is that if you are not an EU resident, you can in some cases get the VAT refunded. Usually stores will do this only for big-ticket purchases (over €175) and it seems like it would be a big hassle (I haven't done it). It invovles showing your passport, filling out forms, and going to some kiosk in the airport when you leave. Even though you can save up to 20% if you do this, the amount of work (especially the airport thing) makes me not very interested. It's also not really done in smaller, more local establishments or restaurants. I did, howver, notice that at the large department store Le BHV they will knock 10% off of your ticket if you show a foreign passport of driver's license, no paperwork required!

Online payments are mostly the same

Lastly, and for me this isn't a big surprise, online payments are mostly the same. I have used Amazon.fr a few times, and booked a few plane tickets online as well. The only really interesting thing I saw was Amazon.fr's currency converter or FX (foreign exchange) service. If you are a savvy payments person, you will know that if a foreign merchant asks if you'd like to pay in your own currency (for example USD when in Europe) this is going to be a bad deal. In these cases, the foreign merchant will probably hide a 3-5% markup in the exchange rate they use for the transaction. The standard markup most US banks charge for a foreign card transaction is 3% (which is still the same or less) but this can also include foreign transactions in USD so you could be double charged FX! If you have a card that does not charge foreign transaction fees, which are becoming increasingly commmon, then you will definitely lose if you don't pay in the local currency.

Amazon.fr kindly offered to let me pay in USD for the transaction below, but I immediately noticed the roughly 3% markup. The spot rate this day was only around 1.14 USD/EUR. I checked my card statement later and this charge ended up being $21.27 so Amazon's USD price would have put exactly 3% on top! Luckily, they do allow you to choose to pay in EUR, and with my 0% FX card I ended up paying close to the the "true" cost of this item.

Currency converter

Conclusion

It's really fun for me to learn about different payment cultures. France is not that different from the US broadly speaking, but there are some fun subtleties and good things to be be aware of. As always, before traveling to a foreign country familiarize yourself with the fees your cards charge for foreign transacitons (including in USD) and avoid currency exchange kiosks. I'm looking forward to following up with another post from Italy in the near future!

Update 20180117

I have a few updates to share for the beginning of 2018. First, I learned that American Express issues contactless cards upon request. I was initially frustrated spending in France because while I prefer Amex, I was choosing to use my Visa card instead because the contacless feature makes it so quick and easy. After seeing that Amex has this feature during some Googling, I called them and they happily sent me a duplicate Premier Rewards Gold card with the contactless feature (and the number didn't change). Now both my primary cards are contactless! I also discovered a good guide about contactless for merchants (focused on UK but many aspects translate).

Secondly, I've noticed one popular payment method in France that I didn't mention before. It's called the Chèque Déjeuner and it's a voucher provided by French employers to subsidize their employees' meals outside of the office. I literally see these every time I go out to lunch. Check out this blog post if you're curious about them.