Two years after the EMV liability shift date, many merchants still aren't EMV compliant. By some counts, about half of U.S. merchants are still swiping cards despite the risk.

For many merchants, the risk of card fraud doesn't have the same sting as suffering actual fraud. This disconnect has a particular hold on smaller merchants that are most often the users of mobile point of sale apps, argues Marc Gardner, president and CEO of PayAnywhere.

"Most merchants aren't as familiar with this as payments vets, particularly in the [small to midsized business] space," Gardner said. "When they learn about it, it's painfully expensive."

Marc Gardner, CEO of PayAnywhere
Marc Gardner, CEO of PayAnywhere.

PayAnywhere, a subsidiary of e-commerce technology and services company North American Bancard, this week began offering its two-in-one card readers (EMV and magstripe) for free, charging only its transaction fees. It's an attempt to undercut other EMV mobile readers and boost adoption of chip cards.

The offer is for new merchants; existing EMV-compliant merchants still pay about $21 for new readers. The company charges about $39 for its three-in-one reader (EMV, magstripe and contactless), though PayAnywhere offers $5,000 in contactless mobile transactions (or about $125 in equivalent mPOS payment fees beyond interchange) in exchange for buying a three-in-one device.

PayAnywhere also hopes the offer of free Bluetooth technology as part of the mobile readers will win converts. Large merchants often use Bluetooth as part of mobile-driven marketing, delivering tailored content to users that are either in or near a store.

Small merchants are more price sensitive and the mPOS/EMV solutions are more expensive than older devices, which are usually free, according to Rick Oglesby, president of AZ Payments Group. "Additionally, contactless readers are more expensive, since they require power," Oglesby said.

As with the terminal market, merchant service providers are willing to subsidize hardware to sign a merchant contract, Oglesby said.

"However, the small merchant mobile point of sale solutions are often pay-as-you-go arrangements and the nature of the merchant population is they will provide relatively low transaction volume, so the economics in this segment make subsidies more difficult," Oglesby said. "As the cost of EMV and contactless readers come down, we'll see the savings continuously passed through to the merchants until the devices are free as a standard. But that's a process that's been ongoing for several years."

PayAnywhere will additionally rely on an added merchant base lured through free Bluetooth and EMV hardware to feed its new open development toolkit. The company has just finished work on an open application programming interface (API) for third party developers to build payments and merchant technology, a move similar to larger payment companies such as the card networks, WorldPay and PayPal, which have adopted open development.

The strategy is designed to tie PayAnywhere's payments to broader merchant services, enabling PayAnywhere, which is a registered ISO of Wells Fargo and other banks, to diversify beyond card acceptance.

"We get asked for payment solutions by third parties in health care, wellness to lotteries…people who don't want to be anywhere near cardholder data," Gardner said. "They want to use our hardware, or tokenization and encryption."

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