CHICAGO — This week marks the first time incentives take effect for merchants to accept EMV chip-card payments in the U.S., and although many are on that path, there is still plenty of confusion over where payments technology is ultimately heading.
The EMV standard, commonly referred to as Chip and PIN because it is often used with a PIN code, allows more secure payments than are possible from a regular magnetic-stripe card. Near Field Communication, or NFC, allows contactless payments from another type of device, such as a phone, tablet or computer.
Merchants have to swallow that “burden of terminalization” to convert their point-of-sale systems for EMV and contactless acceptance, and if they do not make that change, they will be liable for any fraudulent transactions with magnetic-stripe cards, says Barry Hanen, manager of payments and card services for Walgreen Co.
Hanen was one of many experts gathered here Oct. 2 during the 5th Mobile Contactless Payment Innovations Summit.
“We’re all for reducing fraud, but it’s a burden and there is a lot to learn,” Hanen said.
Visa Inc.’s first effective date for EMV-card acceptance takes place this week. For merchants to qualify for the incentive of eliminating some costs during the Payment Card Industry security standard compliance process, they must accept 75 percent of Visa transactions at EMV terminals.
Visa's further EMV conversion dates hit in 2013, 2015 and 2017, with many other card networks following a similar timeline. Merchants aren’t handling these conversions well if they have not already started to plan for the switch, said Rod Hometh, vice president of market development for Ingenico SA.
“The go-getters are starting early,” Hometh said. “It would not be a good way to go about it if you were standing in line waiting [for new terminals] after the deadline.”
Oliver Manahan, MasterCard’s vice president of emerging payments for the U.S. and Canada, said that independent sales organizations and acquirers will help small merchants prepare with an “unplug the old terminal and plug in the new one” simplicity.
Larger merchants that are comfortable with big projects also won’t have much trouble preparing the switch, Manahan said. “Those merchants also have a desire for chip-and-PIN with the new EMV cards as well,” he added.
It’s the mid-level merchants who may find the migration difficult because they may lack the resources or staff expertise to handle the project properly, Manahan said. In addition, those merchants likely “have no leverage with integrators,” he noted.
Hometh agreed, saying merchants who are able to assign an employee to be the EMV expert on the staff will have a much easier time converting, while those without that luxury will face more difficulties.
Panelists generally agreed that a debate about chip-and-PIN vs. chip-and-signature for smartcard transactions should end with chip-and-PIN being the standard. “Merchants want chip-and-PIN and a lot of issuers out there know that signature is outdated,” Hanen said.
Paul Moreton, Capital One’s senior business director for mobile payments, felt another facet of the EMV migration will soon become apparent.
“Through the EMV migration, I think we will see NFC capabilities take off, and we generally view NFC as an alternative to mag-stripe,” Moreton said.
Michael Stephenson, a group manager for payment innovation at TD Canada Trust, says the U.S. will benefit from the card brands requesting EMV and NFC readiness at the same time.
“This puts the country’s payments industry in much closer position for broad NFC capabilities on the consumer and issuing side,” Stephenson said.
Moreton goes as far as to say the Isis and Google mobile wallet initiatives show that NFC is the mobile payment technology of choice for card-present transactions. “Mag-stripe has been ubiquitous for a long time, and we will see that with contactless pay as well,” Moreton said.
Consumers are not looking for a “do this here, and do this there” type of choice for making mobile payments with different technologies, Moreton said.
But merchants expressed some caution about mobile payments hype.
“We view mobile as a long-term opportunity for express orders and remote orders,” said Dave Baldwin, president of Value Pay Services LLC, which works with Subway Restaurants. “When a customer sees others not having to stand in line to place their orders, they will ask, ‘why is that not me?’”
But merchants aren’t seeing widespread adoption of any mobile pay method at this point, Baldwin said. “We embrace the promise of mobile payments, but the reality is that it will be difficult to move in that direction quickly.”