The promise of faster EMV technology is a welcome reprieve for many ISOs who have grown weary of listening to merchants gripe about the snail's pace of chip card transactions. That reprieve, however, may not be so quick in coming.
All four major card brands have announced quick chip initiatives, starting with Visa and Mastercard in April, followed by American Express and Discover in June. But getting the faster technology to market is proving to be a long process.
While the card brands say all that's required is a simple software update to the merchant's card terminal or point of sale system, it still takes time to ready the necessary fixes, test them thoroughly, get them certified in certain instances and roll them out. Visa and Mastercard announced their first deployment in August, but many industry watchers say it will be several months before a meaningful number of merchants begins using faster EMV technology, and they predict it will take even longer to see broad adoption.
What's more, they say, the pain points for consumers will continue for quite some time.
"I think eventually everyone will get there, but it's not a quick process," says Craig A. Tieken, vice president of product and integrations at TSYS in Omaha (TSYS is headquartered in Columbus, Ga.).
The idea behind faster EMV initiatives is to lessen the time customers leave their cards in a payment terminal and allay the customer perception of an unusually long lag time compared with swiping their card. Visa said in an April 19 press release that by using the new technology customers can dip and remove their EMV chip card at checkout in about two seconds or less. And Mastercard found during testing that the card could be removed in as quickly as three seconds, according to Chiro Aikat, Mastercard's senior vice president of product delivery for EMV.
Several industry watchers say they don't expect the actual transaction time to be shorter; however, they say consumers will be happier because it will seem to take less time. With regular EMV, many consumers are reporting—and griping about—having to leave in their card for 10 to 15 seconds.
Once a faster solution is widely available, Tieken expects smart ISOs will begin touting it to merchants, especially those who have been reticent to adopt EMV due to the perceived slowness. He feels, though, that to hype it up now with merchants would be jumping the gun.
Where Implementation Stands
Although the technical requirements are public, there's a lot of behind-the-scenes work to making faster EMV a market reality. The card brands say they are actively working with merchants and processors to implement faster EMV, and their first deployment is now live with the New Leaf grocery chain in San Francisco.
Precise timing for broader adoption is hard to predict, however. Part of the problem is that the industry is so fragmented. There are myriad providers and the time to market will vary for each. One processor, EVO Payments International in Denver, plans to be an early adopter and is in the process of upgrading its payment applications to make faster EMV available to merchants this fall, says Peter Osberg, a senior vice president with EVO. Another large processor told an ISO partner that the technology would be ready in October.
Some ISOs, however, were cynical about the time to market, given that many processors are still inundated with the initial EMV rollout. Mercator Advisory Group, a consulting firm in Maynard, Massachusetts, estimates that 41% of customer-facing POS terminals will be EMV-enabled by the end of 2016. That compares to 68% that are able to accept EMV but have not yet been certified.
Some industry participants, meanwhile, expressed concern that there's been little guidance to ISOs about how to implement faster EMV.
Jeffrey Akeson, managing partner of Great Point Technologies LLC, an ISO in Alpharetta, Ga., says he's had several conversations with his processor and it's still unclear to him exactly how the upgrade will work. What's more, the upgrade process could be more drawn out for merchants whose systems don't allow for automated updates and require human intervention, he says.
"I would definitely say that there's a missing educational component. Both at the ISO level and at the merchant level," he says.
Specifically, many industry players expressed confusion over the certification requirements necessary to implement the changes—and with good reason. Even the card brands can't seem to agree on a standard.
There's a whole rigmarole providers have to go through to certify EMV systems, but for merchants already using EMV, the process to upgrade to a faster version depends on the card brand. Visa and Mastercard spokespersons said that EMV-enabled merchants do not have to recertify their terminals or the software to support faster EMV.
By contrast, American Express merchants who are already certified to accept EMV chip cards will have to undergo a "streamlined testing process" to upgrade their payment terminals to Amex Quick Chip, according to a spokesman. The process can be completed in as little as an hour, and does not involve a full EMV certification, the spokesman said.
Meanwhile, Discover said in a June 23 press release that it will "reduce terminal certification requirements and be compatible with the technical standards offered by other payment networks." It's unclear precisely what this means, and a Discover spokesman declined to elaborate.
Will merchants be receptive?
It remains to be seen whether faster chip card acceptance will lead to greater EMV adoption.
EMV has been a real pain point, especially for quick serve restaurants, said Matt Clyne, president and chief executive of Direct Connect, an ISO in Chantilly, Va. He's had clients who were using regular EMV, found it too slow and turned it off. Once faster EMV is available to them, Clyne says his team will go back to these merchants and encourage them to turn EMV back on, and some of them will probably be receptive.
Even so, he cautions that speed is only one of many issues merchants consider when deciding whether or not to upgrade their systems to EMV. Many merchants—especially small ones—don't feel they are at high risk from fraud and therefore don't feel the pressure to spend hard-earned money on an expensive upgrade.
James Carey, owner of Gringos, a family-run restaurant in Hyannis, Mass. that serves Mexican/American fare, is one of those businesses.
While Carey does find the idea of quicker EMV appealing, he says he's still not interested in upgrading to EMV at this point. His restaurant does a few hundred transactions day, and the average ticket is around $50, so he doesn't feel the prospect of fraud justifies the cost to upgrade his seven-year-old system.
While anything that makes the customer experience seem faster is better, some industry participants predict small merchants won't really start thinking seriously about EMV adoption until the local merchants around them suffer security breaches.
"That will be the impetus to drive change," says Guy DiMaggio, senior vice president of operations in the Westlake Village, Calif., office of iPayment Inc., a merchant processor.
It's also not clear how many merchants who already use EMV will be interested in upgrading to a faster service, especially if processors charge more for it. Some merchants may decide that speed is no longer as pressing a concern as it once was when EMV first rolled out.
While it was a major sticking point early on, consumers over time have gotten used to the longer wait times and are complaining less. "That is something that we're already starting to see in our consumer surveys," says Alex Johnson, director of the credit advisory service at Mercator, the consulting firm.
Ironically, adopting faster chip technology could make it even slower for customers to check out until they get used to the new process of dipping quickly. Merchants will have to retrain their staff and their customers how to use chip cards properly. Initially, customers won't know what procedure to use at a given merchant and that will cause even more confusion and time delays in the short-term.
"It's really, really confusing and messy right now. We're clearly in a place of transition," says Thad Peterson, a senior analyst with Aite Group, a Boston-based consulting firm. He estimates it will probably be a few years before all the wrinkles get ironed out.
In the meantime, Peterson expects the whole confusion around EMV will continue to encourage merchants to enable contactless capability, which is generally already baked into their hardware. Customers like to use contactless payments, which is evident by the dramatic growth rate in Europe, he says. "People really prefer doing a contactless transaction because it's so much faster," he says.