If youve been sifting through your wallet and counting the increasing number of chip-enabled cards you can find in there, youre probably becoming more and more confident that EMV is finally happening in the U.S.
Card issuers, to be sure, are moving in lock-step with the payment networks collective migration roadmap that incentivizes EMV adoption by shifting fraud losses from adopters to non-adopters. Merchant acquirers, on the other hand, think the EMV migration is a big joke.
According to a DDPR survey of 26 ISOs and acquirers in the first quarter, only 30% had an interest in pursuing a partnership or a vendor relationship for EMV. That compares to 72% for mobile point of sale, 68% for digital loyalty, 62% for semi-integrated payments solutions, 58% for integrated payments and 46% for e-commerce gateway.
The overwhelming focus of the merchant acquiring community is not on EMV, but rather on mobile point of sale (MPOS) and the value-added services that can be enabled through MPOS. Why would this be the case just a few months before EMV adoption becomes a key criterion for assigning fraud losses to their merchants? For three reasons: EMV adoption is a low priority for merchants; EMV acceptance solutions for merchants require certification by parties that have long, impenetrable certification queues that will be full indefinitely; and because EMV is a payment technology.
Hopefully, you raised your eyebrows a bit when you read that last one. Why wouldnt an ISO or acquirer be interested in a payment technology, even one that is 30 years old? Because ISOs and acquirers no longer want to be payments companies.
Payments is a mature, crowded and commoditized market where deals are won through pricing concessions. EMV doesnt solve that problem, so ISOs and acquirers are focused elsewhere. Rather than payment companies, they wish to be solutions providers that can offer a whole variety of payment- and non-payment related services to their merchants. They want to be able to provide irreplaceable services that demand premium prices and keep their customers paying for as long as possible. Thats not possible with payments, EMV-enabled or otherwise. MPOS, however, has ISOs and acquirers extremely interested.
Considering the goal of transforming a distribution-centric payment company into an irreplaceable solutions provider, what better answer could there than a technology that offers an application store through which an infinite set of proprietary and third party services can be deployed? MPOS does this so its clearly a far superior platform than is the traditional, single-purpose payment terminal. The key is getting merchants to adopt that new platform. From there, the possibilities are limitless.
And that is where EMV comes in. To merchant acquirers, its not the next generation technology, MPOS is. So what is EMV? Its a network sanctioned, highly publicized excuse to initiate a new dialog with merchants. One that helps open doors so that ISOs and acquirers can speak with merchants about whats really important: MPOS.
So forget about the great EMV migration and start thinking about the great MPOS migration, its far more transformational. Successful MPOS products will transform the way merchants do business across finance, operations, marketing and technology. To succeed in this market, ISOs and acquirers will need to know their merchants payment and non-payment needs inside and out, and have the ability to deliver solutions that meet those needs. That, in itself, is transformational to the acquiring industry. Those that can learn to be true product companies will flourish, those that dont will flop.
Rick Oglesby is a partner at Double Diamond Payments Research and head of product consulting services at Double Diamond Group. He can be reached at Rick@doublediamondgroup.com