As the roll out of EMV continues in the U.S., the key challenges for merchants have been the cost of replacing terminals, the time it takes to modify point-of-sale (POS) software to support the EMV change, and the certification process that must be completed to implement EMV capture. That has created a time and cost burden.
“Right now, only some 25 to 30 percent of U.S. merchants are EMV capable,” says Jim Altman, Middle market Pennsylvania Regional Executive at Huntington Bank. “That’s created an issue that for some merchants is adding up to a double-digit increase in their volume chargebacks.”
EMV is an important layer of additional security for both card users and merchants. It greatly reduces the risk of skimming data from magnetic stripe cards. Merchants in Europe have realized the benefits of EMV deployment, but they’ve had a longer time to deploy.
“Merchants that are holding off on adopting the new equipment needed to process EMV cards should make arrangements to get up to speed as soon as possible,” he says.
Smart Business spoke with Altman about the transition to EMV and how merchants can make it go smoothly.
What is involved in EMV certification?
Merchants work with a processing companies, such as FirstData, that validate credit card transactions. The processors are responsible for ensuring that merchants’ POS terminals are compatible with the processors’ operating system and must be compliant before terminals can be up and running in merchants’ marketplaces.
Processors are certifying merchants’ hardware, software and their retail environment to ensure that they are properly capturing and storing data. That affects the type of servers being used and their encryption capabilities, retail terminal locations and the number of POS devices.
Merchants that have not yet updated their POS should do so as soon as they’re able. If merchants’ processors have the capability and they can get the equipment, they really need to do that.
Many are avoiding it because it’s an expense and a time commitment, but the incidence of chargebacks that they cannot decline is going to be an increasing burden.
There are instances in which merchants want to get equipment but it’s not available. Check in with your processor monthly until you can acquire it.
What are chargebacks and what can be done to avoid them?
Chargebacks happen when consumers discover a charge on their credit cards they don’t believe they made. They call their card issuers and dispute the transaction. The card issuer contacts the merchant about the transaction and the merchant has to prove that it was a legit charge. If the merchant can’t validate that charge, the issuers debit the merchants.
In October 2015 there was a ‘liability shift’. Merchants without EMV-capable POS hardware that process cards that are EMV-chip-enabled lost their ability to fight disputed charges. That stuck non-EMV merchants with more chargebacks.
How are consumers reacting to the added processing time at checkout and what challenges does this present to merchants?
There is an effort underway to capture the information from EMV cards without consumers needing to keep the card in the machine as long. There are upcoming enhancements in the industry whereby the card can be removed while the machine finalizes the transaction. Until that solution rolls out, expect the issue to come up around the holidays when POS lines get longer.
Despite the challenges associated with adoption, EMV protections are working.
Their introduction has decreased the number of counterfeit cards. However, some fraud has switched from face-to-face to digital — scenarios in which the card doesn’t need to be present.
This is a phase in/phase out approach. Soon EMV hardware will be installed at gas pumps, and PIN numbers also will become more customary as card issuers move toward PINs and away from signature. It’s worth the effort. It will take time and there will be challenges, but it’s something merchants should set up. In the long run, the increased security will overshadow any difficulties.
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