As the Liability Shift Rapidly Approaches, Free Can Be a Smart EMV Terminal Motivator

With fewer than 300,000 merchant locations ready for EMV chip card transactions—according to Visa Inc.—efforts to get merchants to upgrade to the more fraud-resistant point-of-sale terminals take on greater importance.

For example, iPad-based POS system maker ShopKeep.com Inc. last week began offering merchants a free contactless reader that also accepts EMV credit and debit cards when they sign up to use ShopKeep and participate in MasterCard Inc.’s Easy Savings program for small businesses. Easy Savings is a rebate program for merchants that use a MasterCard small-business card.

And, a year ago American Express Co. announced a $10 million program to subsidize small businesses’ purchases of EMV-enabled terminals. The AmEx Small Merchant EMV Assistance Program ran from Feb. 1 to April 30. An AmEx spokesman says the company would not disclose how many rebates were issued, but that it was “pleased with the results and are happy to have been able to provide financial and educational resources to help small merchants make the transition to EMV.”

But there are millions more POS terminals to update to EMV, an objective that will take a few years. Of the estimated 8 million U.S. magnetic-stripe-only terminals at medium-size and small merchants, some 60% remains to be converted, says POS terminal maker VeriFone Systems Inc. For all merchants, the Payments Security Task Force consortium forecasts that at least 47% of all U.S. merchant payment terminals will have EMV chip enablement by the end of 2015.

Getting merchants to use EMV-enabled terminals is an important step given the upcoming liability shift for fraudulent transactions at the point of sale.

“It’s important to remember that a liability shift is not a deadline,” a MasterCard spokeswoman says. “It simply means that after the expressed date, the entity—ATM operator, issuing bank, merchant or service station owner—with the least secure technology will be held responsible for fraud.”

So, where does this leave endeavors to convert merchant POS terminals?

“EMV and NFC technology represent the future of the payments industry and by providing these tools with no added cost to the merchant, we’re ensuring that ShopKeep customers are well-suited to stay competitive in today’s retail landscape,” ShopKeep chief executive Norm Merritt tells Digital Transactions News via email.

Independent sales organizations and many other payments companies are offering free EMV terminals in exchange for processing transactions.

By making the EMV terminal as cheap as possible, these payments providers realize the liability shift alone won’t spur many merchants to action.

“Smart providers know that the threat of the liability shift will not be enough to guide the hands of SMBs toward EMV hardware,” Jordan McKee, senior analyst for 451 Research’s mobile payments coverage, tells Digital Transactions News via email. “Lessening the financial burden of the EMV migration is an important factor in encouraging SMBs to make the transition. Decreasing costs makes EMV sting less [for] small-business owners.”

Free equipment, too, has a role in customer acquisition. McKee says 451 Research’s latest IT Decision-Maker survey found that more than one-third of merchants cite “free devices for accepting card payments” as a key factor that led them to select their mobile POS provider.