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This is bonus coverage from “Payments End Game” in the February 2016 issue of Credit Union Management magazine.
Merchant EMV conversion likely slowed after the Oct. 1 deadline because many did not want to disrupt the busiest time of year for them: the holiday shopping season, reports Jared Drieling, business intelligence manager at the Strawhecker Group, Omaha, Neb., a consulting firm that focuses on the merchant acquiring side of electronic payments.
Some merchants delayed EMV migration completely until the holiday season ended to prevent more friction in the checkout line. “However, merchants need to understand the consequences of EMV migration fully now that non-EMV compliant merchants will bear the fraud liability risk,” he says.
The run-up to the liability shift deadline spurred many major retailers to replace their old point-of-sale terminals with ones that can read chip cards, and encouraged many issuers, primarily the large card issuers, to start issuing new chip cards, Drieling notes. Big-box retailers like Walmart and the large issuers have been ahead of the game, while small and medium-sized merchants and regional or local banks have typically been laggards in the migration, he says.
Small and medium-sized merchants or merchants that see little counterfeit card fraud may continue to take a wait-and-see approach—or simply decide the investment doesn’t make economic sense, Drieling says. Being EMV compliant isn’t cheap for issuers or merchants. EMV terminal costs range from about $100 to $600 each, depending on the number ordered and specific product features, while chip cards can cost issuers $1 to $4 per card.
Merchants are at least as overwhelmed as CU executives by the proliferation of payment schemes and technology. So when they replace point-of-sale terminals, they try to be ready for anything, which means getting terminals that can handle EMV and contactless transactions, suggests Brian Day, director of digital strategy at TMG, a CUES Supplier member based in Des Moines, Iowa.
“That doesn’t mean they’ll turn on all the features immediately,” he suggests. “Many will prioritize and start with EMV. They may wait for demand to build before they wrestle with contactless transactions, but Apple, Samsung and Google are all going contactless, so demand will grow.”
However, the CurrentC electronic wallets sponsored by 40 large merchants like Walmart are not contactless today, he points out. Target is offering a “Red” card based on CurrentC that would be an interchange-free contact card that gives consumers a 5 percent discount at checkout. That model could be leveraged broadly by other CurrentC merchants, Day observes.
Richard H. Gamble is a freelance writer based in Colorado.
