Type of Merchant, Customer Base Dictate Which Merchants Should Act First on EMV

With a major deadline arriving in October 2015, U.S. payments players are expected to be busy in the coming months converting systems to be compliant with the Europay-MasterCard-Visa chip card standard. But with liability for counterfeit card fraud shifting in 14 months to the party not prepared for EMV, how urgent is chip card readiness for merchants?

The answer depends on a wide range of factors, according to Craig Tieken, vice president for product and integrations at TransFirst LLC, a processor based in Hauppauge, N.Y. Speaking Wednesday at the RetailNOW conference in Orlando, Fla., Tieken said these factors include what kind of merchandise the retailer sells, how well the merchant knows his customers, how much recurrent business the merchant gets, how much counterfeit fraud the merchant sustains, how many locations the retailer maintains in areas where banks are issuing the most EMV cards, and what type of point-of-sale configuration the retailer is using.

Merchants that sell goods that can be readily converted into cash—jewelry and electronics, for example—should be lining up for EMV because of their susceptibility to fraud. “Those types of merchants want to take advantage of EMV early on,” Tieken told the audience of independent software vendors and value-added resellers, which market point-of-sale technology to retailers. “They sell monetizable merchandise.”

Similarly, merchants whose customers are largely anonymous or are one-time buyers also should feel a sense of urgency, as opposed to merchants whose customers are repeat buyers. “You’re not going to defraud your hair cutter,” Tieken said. Most vulnerable in this regard, he said, are big-box chains and general-merchandise sellers.

Other considerations are how many chargebacks based on counterfeit codes merchants receive annually and whether they operate in markets where banks are early issuers of chip cards, which is likely to increase local customer expectations for the new plastic. EMV does not protect against all fraud but does guard against card counterfeiting, since it is much more difficult to replicate a properly configured EMV chip than to copy a magnetic stripe.

Tieken also advised that merchants running so-called integrated point-of-sale setups—typically, a tablet or PC linked to a card reader, receipt printer, and cash drawer—might want to act on EMV earlier than those using conventional card terminals. For these latter merchants, “it’s really simple, you just buy a new [EMV-compliant] terminal,” Tieken said.

For those running integrated systems, Tieken said a so-called semi-integrated approach might allow for quicker conversion to EMV. In this configuration, the merchant would acquire an EMV-compliant terminal and use it to run card transactions, keeping authorization data out of the stream of information being processed by the PC or tablet. Also, mobile devices such as smart phones and tablets are not secure enough for instances when transactions need to be key-entered, he noted.

Tieken acknowledged this approach might strike some merchants as “a step backward,” since the tablet or PC setup in part eliminated the need for a separate POS terminal. But he said for those using integrated POS systems and seeking a faster route to EMV, the approach might be attractive.

RetailNOW is an annual conference for ISVs and VARs and is produced by the Charlotte, N.C.-based Retail Solutions Providers Association.