Square Inc.’s July 30, 2014, announcement of its upcoming launch of a Europay/MasterCard/Visa (EMV) chip card reader offered few details other than it would take place "later this year." It will be dongle-based, like its current mag stripe reader, and will function with iPhone, iPad and Android mobile devices, Square said, adding that unlike other mobile EMV solutions that "cost hundreds of dollars and require lengthy contracts," its EMV reader will "give sellers an affordable and seamless transition to security accepting chip card payments."
Additionally, Square launched a page on its website that provides Square merchants with basic information about EMV, such as how it combats card fraud, as well as details of the October 2015 deadline imposed by the card brands that will transfer liability for fraudulent transactions to merchants if those merchants are not EMV compliant.
Square co-founder Jack Dorsey characterized the new EMV reader as offering merchants another payment option for their customers. He said, "There are more and more ways to pay, and with options like bitcoin and contactless, customers expect to pay however they want; cashiers should never have to say, 'We don't accept that.' … Our EMV readers are the next step towards ensuring sellers make every sale."
Scott Holt, Vice President of Ingenico SA-owned ROAM, called Square's EMV statement "ambiguous" and "curious" from a strategic point of view. Holt said that an EMV chip and signature (as opposed to chip and PIN) solution will provide Square's base of micro-merchants with a viable EMV solution.
However, if Square expects to penetrate other merchant segments where businesses are processing more card transactions and for larger ticket sizes, a chip and PIN reader would have been more suitable. "Based on our experience today, especially here in the U.S., as the larger merchants have migrated to EMV, the bulk of the migration is toward chip and PIN," Holt said.
Much media speculation has focused on the need for Square to increase revenues by moving "up-market" to the larger Tier 2 and Tier 3 merchant segments and equip those enterprise-level businesses with mobile POS solutions. But Holt believes an EMV chip and signature device does not get Square there.
Speculation has also raised the prospect that Square will branch out internationally. Once again, Holt does not see an EMV chip and signature device as the right solution for international markets. "Chip and signature is one of those payment methods only accepted in three countries around the world," he said. "Most everywhere else around the world, businesses are doing EMV full chip and PIN, regardless of whether it is a fixed terminal or whether it is a mobile solution."
Therefore, Square's chip and signature product suggests to Holt that Square will remain focused exclusively on the U.S. market.
ROAM sells mobile POS solutions directly to merchants and indirectly via ISOs and acquirers. The company, which has been an Ingenico business unit since 2012, offers PIN- as well as signature-based EMV chip card devices. Holt said ROAM launched EMV devices a year ago in anticipation of the liability shift. He stated that Square's entrance into the EMV market is a "little late to market by competitive standards here in the U.S."
Another criticism leveled by Holt on Square is the apparent lack of back-end functionality to support Square's EMV solution. He said larger merchants require sophisticated reporting and business analytics tools today. Holt does not see evidence that Square offers that degree of back-end functionality. "Yes, they have built a hardware device," he said. "But is the rest of their platform EMV ready? I can only assume that it is. It takes more than a piece of hardware to be EMV ready."
Without application programming interfaces (APIs), software development kits and the ability for app developers to integrate highly customized apps into its processes, San Francisco-based Square will be unable to attract larger merchants. "The off-the-shelf solution works for the dog groomer and the babysitter," Holt said. "But it's not something that is going to be used by a major retailer."
In comparison, ROAM operates on a "buy and build" philosophy, Holt said. "You can take the components you want from us and build the rest yourself," he noted. "You can take it all from us. Or you can take just the APIs and go build your own wrap-around." Holt added that this approach provides flexibility for merchants in diverse vertical markets.
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