How long will U.S. merchants wait to fully upgrade their point-of-sale terminals to the EMV standard?
It will depend on which type of business they are in. But many merchants are likely to wait "as long as possible" before making any moves to support the chip card standard, Marc Massar, principal solutions architect at VeriFone Systems Inc., tells PaymentsSource.
One reason is the debate surrounding whether card networks and issuers will use a PIN-based approach, as most of the rest of the world does, or go with a chip-and-signature approach (
Visa Inc., MasterCard Worldwide and Discover Financial Services in recent months have introduced incentives aimed at speeding U.S. adoption of the chip card standard favored in most global markets as a bulwark against counterfeit card fraud (
As a result, many merchants, especially smaller operators, are in "a bit of a holding pattern" as they assess the costs of upgrading versus the potential liabilities of not taking action, Massar suggests.
"Many merchants are still contemplating the investment they may need to make, weighing whether or not they have a choice (to upgrade to EMV)," he says.
The cost of upgrading gives them the most reason to pause.
It likely will cost small merchants hundreds of dollars and large merchants hundreds of thousands of dollars to bring payment terminals into EMV compliance, Massar says. Although many merchants have terminals with hardware that can be adapted to the EMV standard with relative ease, back-office and other processes would need to be reconfigured, which could be costly and time-consuming.
And although it is a long shot, some merchants may hope that if they wait long enough, another scenario may emerge that would enable them to bypass the investment, Massar believes.
"Any merchants that think there will not eventually be broad adoption of EMV are fooling themselves," he says. "In other countries that adopted EMV, merchants that did not do so became the fraud targets."
But card-based payment systems in some ways are archaic, and merchants cannot be blamed for being reluctant to want to sink more money into them, Massar acknowledged.
"If we were building the modern payment system from scratch right now, it would probably not be card-based because there is so much risk in passing card data around," he says. "Noncard-based payment schemes that are on the horizon that may involve smartphones, and some that may not even exist today, would be a much better way to go."
Merchants may hope that "some new innovation will come along" that could replace existing card-based systems before October 2015, when the card networks' liability-shift deadlines go into effect for merchants that have not adopted EMV-compliant payment terminals," Massar says.
But for now, the EMV standard is "absolutely the best" existing way to block counterfeit card fraud, which inevitably will become a bigger problem as long as the U.S. continues to rely primarily on mag-stripe cards that are easy to replicate, Massar says.
Some merchants also are unsure about whether to emphasize EMV or contactless-payment technology as they prepare to upgrade their payment terminals, Massar says.
"There is a lot of confusion out there even among seasoned payment professionals about EMV, which is a standard, and NFC, which is a technology," he says. "The card networks have made it clear that merchants will get the fullest benefit of incentives if they adopt both EMV and NFC, so in most cases that's the way merchants will go."
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