Revel Systems this week launched an iPad-based chip and PIN processing system in U.S. The technology integrates payment processing with chip and PIN card payment devices from Ingenico and Quest Payment Systems. Integrations with VeriFone, Genius' payments platform and Tyro Payments are expected to follow.
The ability to process chip and PIN payments is part of complying with Europay, MasterCard and Visa (EMV) standards. EMV payments are generally considered safer than traditional magnetic stripe payments, and large parts of Europe, Asia and Canada have already migrated to EMV. The migration in the U.S. has been painfully slow, though it's picked up steam in the past year.
In an effort to shave time and migration expense for EMV processing, Revel has built payments reporting and tracking directly into its own back-end management console. Instead of requiring merchants to install external hardware to read chip and PIN payments for processing, Revel is instead hosting the processing. Merchants with wireless connections can integrate payment terminals, or tablets or smartphones equipped with payment dongles, with Revel's hosted point of sale processing for either magnetic stripe or EMV point of sale payments.
"It's cloud based, so there's no need for a back-office server," says Chris Ciabarra, Revel's co-founder and chief technology officer.
Revel had previously required the installation of external hardware for EMV reading for payment processing. Ciabarra says that procedure is slower and less integrated than the new hosted and integrated method. He says integrating directly with EMV readers is the next logical step for his company, which supplies tablet-based point of sale systems mostly used by grocers, retailers and restaurants or offered to those retailers by merchant acquiring banks. Ciabarra did not release the names of acquiring banks that are using the new cloud-based system, but says the company is in contact with four banks.
Card networks such as MasterCard (MA) and Visa (V) are leaning on merchants and merchant acquiring banks to adopt EMV by submitting a series of deadlines for migration, with merchants potentially on the hook for fraud losses if they continue to use magnetic stripe cards.
One upcoming deadline is April 1, when Visa will require VisaNet acquirers to support merchant EMV chip acceptance.
Revel is not the only company treading this path. VeriFone (PAY), for example, recently introduced Sail EMV, a platform that allows banks and acquirers to provide smartphone and tablet based EMV payments to small and medium sized businesses. The solution includes adaptors such as mobile phone software development kits for integration with iOS and Android mobile platforms. The Sail EMV reader connects to a smartphone or tablet via the audio jack and enables merchants to accept both EMV and magnetic stripe cards.
Analysts say processing these payments in the cloud can help defray hardware replacement costs. "You connect [payments] to a piece of software and have your transactions done with software running in the cloud. That has some advantages but you have to have wireless connectivity all of the time in the store," says Zil Bareisis, a senior analyst for Celent.
Rick Oglesby, a senior analyst at Aite group, says the lower cost of mobile technology can help defray the cost of EMV migration for card acceptance and payment processing steps. "EMV dongles [the devices that enable mobile card acceptance] are new at this point and still pricey, but those prices should come down as EMV rolls out and solutions [like the VeriFone Sail EMV] become common. Overall this means that EMV upgrades for mobile POS solutions should be lower-cost than for a traditional POS system where entire terminals will need to be replaced versus simply swapping out the dongle and updating the mobile app."
Oglesby agrees that the cloud-hosting model for merchants and acquirers to manage EMV processing can be helpful. "The payment networks each have their own flavor of EMV specification, and it is likely that there will be some variation across processors as well. This means that managing EMV specifications for solutions that are housed locally could become very complex with systems needing to be regularly updated with software that supports a variety of different EMV permutations. Cloud-based solutions could handle this separately and deploy the solution to merchants at scale, simplifying management and deployment of EMV solutions," he says.
However, simplifying the migration to EMV by using mobile devices for acceptance and a mix of mobile, wireless and the cloud for processing may not be that simple, particularly since EMV is not the only massive payments migration underway for merchants and acquirers-contactless mobile payments are also on the horizon.
"The new cloud-based EMV is interesting and innovative…but part of EMV replacement is to marry the implementation and swapping out of the terminal [for contactless payments]," Bareisis says.