If there is one universal truth in payments, it’s that the easier a process feels to consumers, the more difficult it was to implement on the back end. Such is the case with EMV — the chip that allows customers to pay with a credit card by inserting or “dipping” it into a point-of-sale (POS) card reader instead of swiping the old mag stripe.
Consumers have eagerly embraced the EMV chip, believing it to be more secure, but merchants have not been so quick to open their arms to the new method, even after the 2015 fraud liability shift went into effect. Two years later, only half of U.S. merchants are EMV-enabled.
The fraud liability shift was not a mandate; it simply meant that merchants could be held liable for counterfeit, lost or stolen card fraud if their terminals were not EMV chip-enabled. In the event of a chargeback, the party supporting the most secure technology for the fraud type prevails.
But fraud liability isn’t all that the EMV shift has changed. Dan Lane, president and CEO at Merchant Link, said it has introduced confusion and inconsistency for merchants and consumers alike. It has affected the speed of sales and forced merchants to make decisions about their entire point-of-sale systems — plus the consumer experiences it facilitates, for better or for worse.
“One partner described it as the trainwreck at the point of sale,” Lane said. “A lot of businesses think they can get out and conquer the world … until they get into the store and realize how complex it is and how many other dependencies there are. That becomes part of the sand in the gears that’s slowing things down.”
However, Lane believes those are just growing pains. EMV has driven evolution by merchants, consumers and organizations like Merchant Link, which started out as a cloud provider but has now grown to provide a full-suite solution for merchants, including hardware, gateway service and support.
Lane said the EMV shift has been difficult, but it has also created new opportunities and will continue to do so. Here’s how the space is morphing today and what Lane believes is coming tomorrow.
Integrating EMV capabilities has forced merchants to ask broader questions about their POS and the customer experience that goes with it, said Lane.
For restaurants, do they want to let customers pay at the table or take the card away? Paying at the table speeds up the sale but makes many customers uncomfortable, Lane said, since they feel like the waiter is hovering over them.
Lane noted that paying at the table is accepted as the norm in most other parts of the world, but in the U.S., the negative impact to customer experience is enough to keep many restaurants from offering it, or even to cause those who try it to roll back the capability upon finding it doesn’t work.
For hotels, do they want to bolt a PIN pad to the check-in counter or continue having customers hand their cards across the counter? For retailers, do they want to have a series of prompts on the consumer-facing device followed by a buzzer that tells the customer to remove the card, or do they want to have an employee handle all of that on the other side of the counter?
Across the board, said Lane, merchants are looking at their entire payments strategy and choosing to consolidate. They no longer want a multi-vendor setup where they get a PIN pad from one company, a gateway service from another, et cetera, he said. They want one provider delivering a total solution. Often, changing one technical element can have a domino effect on everything else, leaving them with little choice in the matter.
Lane said some merchants are also opting to outsource payments from their software systems due to the complexities of accepting EMV chip cards. The logic, said Lane, is that they’re spending a thousand dollars for a new POS — or several thousand for several units — so it better integrate well with the entire system, and it better not need to be replaced again in two years.
Lane said that’s part of why Merchant Link expanded its offerings.
“Our business is about keeping things easy for the merchant, and EMV is making that harder,” said Lane. “But it’s also created an opportunity to continue providing that to merchants.”
Theory of Evolution
With so many options, it’s no wonder merchants aren’t offering a uniform experience, said Lane. They each have different needs and are making different choices, which leads them down different certification paths and creates a different customer experience.
Payment diversity leads to customer confusion — and that’s to say nothing of how merchants feel when faced with all these choices. What will it take to deliver a more consistent experience? Lane said the answer is simply time.
Gradually, merchants will provide feedback to service providers, allowing them to hone their products and adapt through new configuration options. Lane said that people have been in such a rush to make the technology available that the initial versions can’t provide all the options retailers want and need.
That’s part of why so many merchants are hanging back, he said. Why invest now when there will be a new “latest and greatest” product tomorrow?
“Merchants realize they have to do it. The liability shift is real,” Lane said. “But they have to put a stake in the sand and say, ‘OK, this is the version I want; this is the configuration I want. Do I do this now and spend money and lock this in, or do I wait for contactless to be available — or wait for the next thing, for … pay at the table to be available?’”
Whatever they decide, merchants will need to live with their choice for at least a couple of years. So, what is the payments world going to look like during that time? Will it be a whole new animal, necessitating a whole new wave of POS upgrades?
Lane believes that EMV is here to stay, but that more changes are also in the pipeline, as mainstream contactless payments are coming — much sooner than people think.
Today, there are 1.2 billion EMV chip cards in circulation. The number of contactless payment cards is much, much smaller, although smartphones and digital wallets are also enabling customers to tap and pay. Lane said that, today, EMV is a must, while contactless is a nice-to-have; but he doesn’t think it’ll be that way for long.
Luckily, the new terminals created to accept EMV are also capable of taking contactless payments — meaning when tap-to-pay does arrive in a mainstream way, the integration will be much easier, since processors will be able to handle them from day one. When that happens, Lane believes the transition will be fast — certainly faster than the EMV transition.
“In the U.S., where convenience is king, consumers will quickly figure out that tapping [a] card is easier than inserting a card,” Lane predicted. “I think it will happen quickly when those cards are issued.”