Wednesday, November 18, 2015
As Europay, MasterCard and Visa (EMV) adoption gains momentum in the United States, some merchant level salespeople (MLSs) have encountered difficulties while helping retail and hospitality businesses to accept tips and gratuities while using EMV-compatible solutions. However, many payments analysts see little variation between adding tips to mag stripe transactions and the chip-and-signature transactions that are being phased in to U.S. merchant locations.
The Princeton, N.J.-based Smart Card Alliance and EMV Migration Forum published a white paper in September 2015 titled Managing Card-Based Tip and Gratuity Payments for EMV Chip.
The forum, a cross-industry body focused on supporting EMV chip implementation for payment networks, issuers, processors, merchants and consumers provides guidance on a range of topics, including chip card technology, best practices and regulations. Its primary objective is to successfully migrate to chip technology in the United States.
The white paper provides insights into how to serve market segments that accept tips and gratuities via card payments without drastically changing habitual consumer payment behaviors. The authors noted that most tip adjustments occur after payment card authorizations have been processed and that there is no need to change this practice when chip card technology is introduced. "There is nothing particular to chip that would cause a merchant to change this existing practice after migrating to chip," the paper stated.
A blog post by Merchant Link, an ISO based in Silver Spring, Md., had a similar viewpoint on post-EMV tip adjustments. Nothing about the process needs to change with a chip and signature approach, Merchant Link advised. "This is the primary reason why Visa proposed this as the entry into EMV for the U.S.," the company noted. "Just doing chip and signature would virtually eliminate card-present counterfeit fraud in the U.S., which is the main focus of EMV."
The forum's white paper presented three acceptance models for card-based tip and gratuity payments, any of which will work with chip cards:
"Not all EMV applications, particularly those developed in other countries, support these three commonly used tip adjustment methods," said Terrence Crowley, Chief Executive Officer of New Jersey-based TranSend. This could be the source of problems MLSs have found in the field. TranSend recently released RevChip, a solution that is compatible with Ingenico and Verifone EMV card readers and designed to facilitate all tip adjustment methods. The application, which resides inside the payment terminals, also supports bar tabs, partial payments with low-balance gift cards and a no-signature option for quick-service restaurants.
Craig Ludwig, Head of Product at Total System Services Inc.'s Merchant Services segment, described the RevChip software application as "valuable in helping our VAR and ISV business partners ‒ as well as our merchants‒ satisfy U.S. market requirements."
U.S. guidelines stipulate that authorization requests must be for the total amount of a transaction. "Unless specifically permitted in the payment network, a U.S. merchant must not use an arbitrary or estimated amount to obtain authorization, and must not add an estimated tip amount to the authorization request beyond the value of goods provided or services rendered, plus any applicable tax," the forum's white paper stated.
The forum recommends the counter pay or table pay options for merchants who select PINs as a preferred cardholder verification method for debit and credit card transactions, because cardholders need to be proximate to the PIN pad to securely enter their PIN. They recommend that merchants contact their payment processors for additional information on supported devices and best practices.
In any event, it is imperative that payment providers select EMV solutions that are appropriate to their particular markets and then educate their MLSs so that they, in turn, can educate merchants to enable glitch-free EMV integration that does not require businesses to conform to other regions' tipping norms.
Yaniv Chechik, Manager of Product Development at New York-based Zooz, anticipates that the EMV roll out in the United States will hasten adoption of mobile payment technologies. "When the U.S. moves to full EMV, we'll see broader mobile payment adoption, including apps that enable consumers to pay by phone, smart watches and other wearables in restaurants," he said. "Many people will not be willing to provide their PIN to mom-and-pop retailers and may go to a different [payment] method."
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