How should a full-service payments provider help a merchant if what the merchant wants could put them at risk? That’s the question some providers must address as they seek to offer merchants flexible solutions to address their biggest challenges.
For storefront merchants, the world of eCommerce brings plenty of challenges. The challenge for brick-and-mortar businesses is to stay competitive with online companies that can deliver goods right to consumers after they point, click and add an item to their online shopping cart.
But eCommerce also offers an opportunity for these retailers to modernize by adopting technology and payments-as-a-service (PaaS) solutions that can help them run their establishments and reduce some of the worry that owners face about managing their businesses.
Arguably, one of the biggest sources of worry for business owners is whether or not a customer will make a purchase. This outcome can be more difficult to anticipate, as some customers have struggled using EMV-compliant point-of-sale (POS) systems. If a customer encounters difficulty during the checkout process due to problems with a store’s POS checkout solution, the store could risk losing the transaction and the customer’s business. Additionally, one customer’s difficulty using the EMV-compliant POS solution could have a ripple effect on other customers as they face longer checkout times.
While EMV compliance is intended to shield merchants from liability, some merchants must consider if complying with EMV guidelines is worth the risk of irritating customers. To discuss the pros and cons of adhering to EMV guidelines, PYMNTS recently caught up with Michael DeSimone, CEO of payment solution provider ShopKeep, about the problems some merchants are encountering with EMV-compliant technology and why they are seeking more flexible solutions and sometimes choosing to bypass compliance altogether. He also discussed why the company is focused on helping merchants that fall into what he considers the “Goldilocks Zone.”
Is It Worth Complying with EMV Rules?
Founded in 2008, ShopKeep is a Cloud-based iPad POS systems provider that has roughly 25,000 storefront clients signed on to its platform. DeSimone said the company’s mission is to provide tools and solutions to smaller companies that will allow them to compete with larger businesses. The company’s portfolio of solutions includes an iPad-based payment register, payment acceptance solutions, inventory management, and data and analytics tools.
ShopKeep also offers merchants a flexible solution for merchants to handle EMV payments. Chip-based EMV technology is aimed at helping businesses reduce fraud by providing consumers with payment solutions that increase security for in-store transactions. With the shift to EMV-based chip cards in place, potential liability for card-present fraud will shift from payment issuer to the party that is the least EMV-compliant. Merchants that do not implement EMV-ready solutions could be liable for covering expenses-related fraudulent charges.
Although EMV compliance rules have been in place since late 2015, the adoption of these POS systems has not always gone smoothly for some merchants. While the chip-based technology is intended to reduce the risk of fraud, it can also result in a problematic checkout process that frustrates customers and backs up lines.
According to DeSimone, this frustration with EMV-based chip readers is why some merchants are ready to throw in the towel.
“As we’re rolling out EMV, we’re finding merchants that don’t want to offer it,” DeSimone said. “They’re willing to live with the risk.”
DeSimone pointed to an example of a ShopKeep client who decided EMV compliance was too much of a problem. The client, a Long Island-based bakery, determined that the use of EMV-compliant terminals was causing problems for their customers and causing long wait times at checkout.
“With EMV, it’s not just the processing time,” DeSimone said. “It’s the amount of time that it takes the customer to figure out which way they should use the card. Most of us have dual magnetic stripe and chip devices. You swipe, it doesn’t work. You stick it in [the chip reader, and] it doesn’t work. In the meantime, the line is getting longer.”
In the end, the client decided the checkout frustrations were too much to bear and requested the EMV solution be deactivated. But the bakery’s issues with EMV technology also helped ShopKeep realize that merchants want more flexibility when using the technology.
“That was an ‘A-ha!’ moment for us,” said DeSimone. “Different types of merchants have different types of needs, and being able to offer them that flexibility is a big deal.”
ShopKeep’s portfolio of payment solutions offers clients the ability to turn the EMV portion of the POS system on and off at various points in the day. On the back end, the solution can track whether a transaction was made with an EMV chip or a magnetic stripe and record that data in the Cloud. DeSimone said the average transaction amount for the bakery was $8, so the merchant believed its liability risk of having to cover the cost of a fraudulent charge was fairly low. Hence, a more flexible EMV option was the determined to be the better option.
“The individual risk at the ticket level of someone coming in to counterfeit them out of some muffins is probably not worth it to them to have a longer line,” DeSimone said.
Helping Companies in the ‘Goldilocks Zone’
DeSimone took over as CEO of ShopKeep early last year. The company focuses on providing POS solutions in three key verticals: retailers, quick-serve and full-service restaurants. He refers to these types of verticals as businesses that fit comfortably in ShopKeep’s “Goldilocks Zone.” In other words, he believes his company’s solutions are just right for their needs and intends to keep the company focused on helping these types of businesses.
“Staying in the Goldilocks Zone is going to be important,” DeSimone said.
“I think you can get pulled into an environment where you’re constantly evolving customer-level specific features and you’re never really able to continue to innovate in a way that helps the whole segment,” he said. “I’m trying to keep the company centered on that.”
By focusing on merchants in the “Goldilocks Zone,” DeSimone sees an opening to help storefront merchants reinvent themselves to stay competitive against their online counterparts. While many small businesses struggle to stay afloat, especially when facing off against eCommerce merchants, DeSimone said he sees opportunities for many small companies to thrive.
“My view before coming to ShopKeep was that physical brick-and-mortar was in trouble because of eCommerce,” he said.
But since joining the company last year, he said those views have evolved.
“What I understand now is that as eCommerce eats the world, to paraphrase somebody, it creates a lot of opportunity for small businesses to come in and flourish,” he continued.
The opportunities for small merchants lie in real estate, he said. DeSimone encourages storefront businesses to compete with bigger online players by offering consumers a unique product that they can’t buy from an eCommerce merchant.
“What goes in [the storefront] is something that you can’t buy on Amazon, like a really good package of takeaway ribs,” DeSimone said. “Amazon can’t do that. They’re going to try, but they can’t do that for you.”
While economic realities might close a door for one small storefront merchant, it opens a new door for another merchant with a unique product offering.
“I think it creates an environment that eliminates the generic and favors the much more specific in terms of physical retail,” he said.
DeSimone believes it has gotten easier for merchants to open their own businesses. But merchants still face hurdles from regulations, such as EMV liability rules. For smaller merchants to pursue their dreams, address their challenges and make the most of their opportunities, it’s important for payment solutions to help them reach their goals, not get in the way.
“The one thing that can kill a merchant is cash flow,” he said. “If you don’t have a cash flow, it’s a problem.”
In other words, he believes payment solution providers should focus on helping merchants get paid and helping consumers use their preferred payment method at the POS.
“It should be easier to start a business, not more difficult,” said DeSimone.
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About the Tracker
The PYMNTS.com Payments as a Service Tracker™ is designed to give an overview of the trends and activities of merchant platforms that not only enable payment processing of new and old technologies but also integrate with other features to improve the merchant’s experience, including customer engagement, security, omnichannel retail, analytics, inventory management, software and hardware management and more.