Coming off the Sage Summit in New Orleans at the end of July, where MPD CEO Karen Webster had the opportunity to talk to many small business owners about their views on payments (among other things), she recently reconvened in a conversation with Robert Bertke, Senior Vice President of Research and Development at Sage. They discussed their takeaways from the event — in particular the challenges that small business owners face in preparing for the upcoming EMV liability shift in October.
Small businesses aren’t the only merchants that are ill-prepared to handle the move to EMV, but they may be the group that has the best “excuse.” Quite simply, SMBs (as the label implies) are small and resource-constrained. What time they have, they prioritize around the needs of their customers over everything else. It’s a perfectly reasonable rationale, but that fact alone — or that reality perhaps — doesn’t excuse small businesses from having to bear the responsibility in the event of fraud when October 2015 rolls around.
Bertke believes that there is a way for SMBs to prepare themselves for the EMV shift while minimizing the strain it places on their day-to-day operations. He and Webster talked through the details.
KW: I just came back from Sage Summit, which I thought was a great experience. I got the chance to mill around with the more than 7,500 small businesses that came. And I heard firsthand from them some of their reactions to all the things that are coming at them and that they are trying to absorb, of course including EMV. Statistics show that more than half of them simply won’t be ready in time for the liability shift on Oct. 1.
What are you telling small businesses that aren’t ready? And, perhaps more important, how are you convincing them that getting prepared for the shift is worth the effort?
RB: That’s a really good question. I think the biggest piece of this for Sage is to help educate our customers about the exact implications of EMV and let them make the decision about when it’s in their company’s best interest to invest the time and the money.
More importantly — and this is something that people really need to understand — training is one of the biggest components of EMV. I think it’s really on us at this point; we did it through Summit, and we’ve had other webinars and even created a website that deals with the topic. We’re doing what we can to educate merchants as to what their responsibilities are and what they need to look at.
It’s also important to understand that EMV is not a mandate. There is a liability implication, but it’s not mandatory that a merchant actually comply. They need to make that decision for themselves.
KW: What are merchants contemplating? What’s in their consideration set?
The thing that struck me, as I was talking to some of the businesses owners at Sage Summit, was how they’re very focused on the basics of running their companies: getting paid and sending out invoices on time, for example. EMV is not a top priority for them because it doesn’t help them check either of those two boxes.
RB: Exactly. But they need to take into consideration the liability shift in October that will accompany EMV technology and balance it with the other factors that you mentioned.
I can tell you from our experience working with small business owners that they don’t have a lot of time to consider things other than serving their customers. We do what we can to concisely give them the information about EMV so that they can understand.
Come October, if a merchant accepts an EMV card but doesn’t process it as an EMV transaction and that card transaction ends up being fraud, they will be liable for it. To evaluate their potential risk in that regard, the merchant has to take into account factors such as the amount of fraud that they already see in their business, their existing relationships with their customers and things of that nature.
KW: It’s not that small businesses aren’t concerned about fraud or they’re de-prioritizing it; perhaps, they don’t really understand the impact because they are small. Do you think that’s part of it?
RB: I absolutely do. The one thing that’s obvious to me as I speak to these owners is the amount of time and energy it takes just to keep the lights on in a small business — all their time goes towards that. Analyzing the fraudulent transactions that they deal with and understanding how they occurred, or even the degree to which it should be a concern to them, is not something on which they’re very well-educated.
The challenge for Sage has been providing them with that information in a way that they can understand it and then make their decision about how much time they can spend looking into their exposure.
KW: How are you helping them to gather that information and make informed decisions?
RB: We have spent a lot of time creating a number of resources — not to mention the number of presentations and webinars that we’ve given in which we lay out exactly how the fraud can happen. As I mentioned, we’ve got a website, SagePaymentsEMV.com, that is specifically dedicated to helping our customers understand exactly what they need to be concerned about.
Our responsibility is to provide this information to our customers in a way that they can consume it. Short webinars, online information and concise fact sheets are the way to access them because they’re very busy. We can’t provide lengthy documents that are deep explorations of liability; we need to do this in sound bites that get the information across in a short time. We’ve been doing that through a number of channels to get the message out.
KW: Another thing I talked about with some of the business owners at Sage Summit was the notion of contactless cards, mobile wallets and other forms of payment and how they’re thinking about accepting them. I did get a lot of blank stares!
How do you think those kinds of innovations are factoring into the small business owner decision set?
RB: From my experience, those are much smaller considerations than EMV. Right now, small businesses are not experiencing any big push from their customers to accept contactless payments, certainly, or even mobile. We have merchants who do accept Apple Pay, for example, but I don’t feel that our customers believe that’s absolutely critical in their day-to-day operation.
If it’s built into solutions, I think they’d like to have it. It is important to Sage that we help our customers be able to take any payment, anywhere, any time; and we’re working to bring solutions to bear so they can do so for free. But I don’t believe they’re willing to work hard for it at the moment.
EMV, on the other hand, is a little more concerning. While small business owners are focused on keeping the lights on, they realize that although they don’t want to spend the time on EMV, they’ll have to at some point. As their customers start to demand contactless payments or mobility, they will become more interested in those products.
I do believe that contactless cards, from what we’re seeing, don’t seem to be the real driver of that kind of technology. It’s more mobility: solutions like Apple Pay, Android Pay and Samsung Pay. As more of those come out, I think they will define the landscape of new technology like contactless payments more than RFID cards, for example.
KW: I think you’re right. Businesses will wait until enough consumers ask for acceptance of a specific payment method, and then they’ll explore it. To your point, making it easy for them to basically flip the switch is what small businesses would find to be the ideal solution, because they don’t have the resources or the expertise to figure it out on their own.
A trend that we frequently cover on PYMNTS is omnichannel, particularly from the business perspective. How are small businesses considering omnichannel — being present on the mobile channel, on the online channel and in a physical environment? Do they perceive it to be a barrier or a priority at the moment?
RB: I believe that it is a priority for many businesses. Sage is working to help our customers understand that omnichannel is important.
The concept of serving your customer anywhere and any time that they want to make a payment is very important to the way the industry is moving. I think customers are going to more and more expect technologies like roaming POS — like you find at an Apple Store, for example — to be available. There’s also of course the popularity of eCommerce. As businesses continue to explore payments, they desperately need to consider omnichannel options.
KW: As we talk right now, we know that more than half of businesses won’t be ready when the EMV liability shift occurs. Do you think that small businesses will become EMV-compliant over the next three to four years? Do you think they’ll look at alternatives like mobile, in some cases, to leapfrog an EMV requirement because of the environment that they’re in? What do you think they’ll have to overcome to get to that future state, whatever it may be?
RB: We can look at Canada and its EMV rollout as an example here. After seven or eight years, they’re only at an 80 percent merchant acceptance rate; 20 percent of transactions are still on a traditional card. It’s fair to assume, then, that over the next several years in the U.S., we will not approach a 100 percent merchant acceptance rate for EMV.
This kind of goes along with the omnichannel point. I think what’s going to become clearer over the next several years is that small businesses have to be prepared to take payments in a multitude of ways. That includes traditional cards, completely bypassing EMV. And EMV itself comes in a couple of flavors: there’s chip-and-signature, and there’s chip-and-PIN. Understanding all of the various payment options that your customer has and making those available will be the challenge in the next five years.
I don’t believe EMV is going to make any of this easier; in fact, I think it’s only going to make it more complicated. As we move towards, let’s say, 2020, the challenge for these businesses is just going to be continuing to keep up with the payment trends. To your point, something could come along that could circumvent EMV a little bit — perhaps a mobile POS.
The important thing for small businesses is to stay flexible. They should select a payment partner — Sage considers itself a good candidate in this regard — that’s very focused on making sure they’re up-to-date and work closely with them to ensure they’ve got the tools they need.
KW: Do you think that consumers will be educated enough about EMV cards that they’ll start asking merchants that don't accept them why they don’t?
RB: That’s a very good question. It could happen, but I don’t believe we’re at that point right now.
The vast majority of the people I speak with who have EMV cards have simply noted the novelty of the chip being in the card. The liability and the implications that chip has have not reached consumers in any way that I can see. Over time, as more people experience EMV transactions, I think they’ll come to understand it better. But I think that’s going to take a period of months and years.
KW: We never seem to get rid of any payment method. Merchants still accept cash, they’ll reluctantly accept a check, they’ll obviously take cards … and, once enough momentum has occurred, they’ll accept a variety of mobile payments.
The point you made earlier about merchants having the right capabilities to seamlessly enable the new payment methods that come along without complicating their own environment is critical — especially when you’re a small business, and you have to be able to pivot from the consumer that pays you in cash to the one that uses a mobile app to pay. It’s a lot to deal with.
RB: I agree. And in fact, something that Sage Payments takes great pride in is helping our customers take any kind of payment, any time. We support check transactions; we’ve got point-of-sale devices that have the ability to record cash; our mobile solution has that ability, as well.
There’s two sides to the matter. There’s the “cutting edge,” which a merchant needs its provider to help it stay on, but there’s also the “long tail.” I think Sage is uniquely positioned to help customers with both sides of that equation. But you can’t ignore checks; you can’t ignore cash. As you said, we never get rid of those. That long tail is going to stay pervasive in a business for years to come.
KW: As I said, I really enjoyed being at the Sage Summit. You really get the sense of what’s important to a small business when you actually talk to them — learning what they’re worried about, what their priorities are, what keeps them up at night.
Payment methods and related elements are important to them, but not as important as making sure their overall business is running smoothly: that they’re selling products or delivering services and keeping their customers happy. All of this other stuff has to work for them in a way that doesn’t introduce complexity or friction.
RB: You bet. That’s why, at Sage, we consider it our charge to make sure that we provide these solutions absolutely seamlessly. Those merchants just don’t have the time to think it through, so it is incumbent upon a provider to build the solutions in, make it easy for them to add to an existing suite of payment options and make sure that they seamlessly integrate. We believe, as a provider, that we have a responsibility to keep it simple.
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