The switch from magnetic stripe cards to EMV chip cards in the U.S. appears unlikely to create a surge in demand for EMV-capable terminals, at least in the near future.
Merchants probably will wait to upgrade their equipment until the 2015 liability shift some of the major card brands plan to impose draws closer.
Still, terminal makers do expect some increased demand from the changeover; Ingenico saw an increase in terminal sales in Canada during that country’s switch to EMV, says David Chaudhari, managing director of Ingenico Canada.
“But it wasn’t astronomical. It wasn’t a doubling,” Chaudhari says. “I think that will probably be true in the U.S. because, like Canada, the U.S. has been placing EMV-capable devices, so it will require a software switch.”
Demand should increase as the liability shift approaches, though it may be gradual. “I don’t think you typically see a spike,” says Todd Ablowitz, president of Double Diamond Group LLC, a Denver-based payments consulting firm. “You see a curve of opportunity. The beginning is slow, and the end is slow; 2016 to 2018 would be the middle.”
Demand will pick up once merchants start to use the cards to make purchases in their role as consumers, contends Henry Helgeson, Co-CEO of Merchant Warehouse, a Boston-based ISO.
“In the medium-term, I think this is really going to take off. In the short term, it’s going to be small, incremental sales,” he says. “It’s about demand generation at this point rather than demand capture.”
Terminal makers expect the strongest demand for new terminals to come from two sources: merchants whose terminals are due for an upgrade in the next three to five years but who would have preferred to wait but no longer can do so because of the liability shift, and merchants lacking customer-facing equipment.
“In the EMV world, the consumer has to insert their own card, and there’s a fairly significant amount of merchants in place today. Think of small merchants, but also in areas like hospitality, when you check into a hotel, or restaurants, when you pay at the table, says Erik Vlugt, vice president of marketing for North America at VeriFone Systems Inc. “All those segments where you’re used to a card handover are going to be churning.”
Thierry Denis, Ingenico North America president, also expects the pay-at-the-table segment to become important, especially as consumers grow accustomed to EMV and used to keeping their cards throughout transactions.
Even with the increase in demand for terminals, it’s unlikely that demand will translate directly into increased profits for independent sales organizations and sales agents from selling and leasing the devices.
“The days of making money on the terminals are long behind us,” Helgeson says.
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