The Green Sheet Online Edition
November 09, 2015 • Issue 15:11:01
Assessing the U.S. EMV rollout – Part 2
In "Assessing the U.S. EMV rollout – Part 1," The Green Sheet, Oct. 26, 2015, issue 15:10:02, members of our Advisory Board weighed in on the official launch of EMV (Europay, MasterCard and Visa) in the United States after the Oct. 1 liability shift.
This article contains the second and final portion of responses. We are grateful to all members of the board who took time to respond to the following questions:
- What has your business done to roll out EMV to the merchants? What seems to be working well? Have you encountered any problems with your rollout?
- Do you expect an uptick in card-not-present (CNP) fraud? If so, what steps is your company taking to mitigate it?
- Do you think EMV is going to be effective in securing the U.S. payments system?
- What advice do you have for agents regarding EMV and their merchants?
Jared Isaacman, Harbortouch
EMV is officially here, but is everyone ready? Industry-wide, the answer is no. Many processors are still working to get terminal applications certified for general EMV acceptance, let alone more advanced functionality like tip adjustments. Further, the industry is still trying to sort through the complexities of EMV in the restaurant environment.
Internationally, restaurants are typically addressed with pay-at-table devices, but these have never really caught on in the U.S. due to our unique tipping culture and general consumer behavior. I think it is still going to be some time before the entire industry is ready to support EMV transactions in all retail environments, and even longer before we see EMV become standard in restaurants.
What has your business done to roll out EMV to the merchants? Harbortouch is providing complimentary terminal upgrades to merchants on our free equipment program. Our primary offering is a Verifone VX 520 with customer-facing VX 805.
We believe that a customer-facing approach is the most practical way for merchants to accept EMV instead of having the employee turn their terminal to the customer during checkout. We are also certifying customer-facing EMV devices, such as the Verifone VX 805, to our POS systems. We have also made an aggressive push to educate and train both our sales partners and merchants on EMV and the liability shift.
What seems to be working well? Our choice of terminal with a customer-facing device was definitely the right decision. This offers a much more practical and ergonomic setup than a single terminal that needs to be handed to the merchant during checkout.
Have you encountered any problems with your rollout? Like the rest of the industry, determining the best way to support EMV in the restaurant environment is a challenge. Solving pay-at-the-table is not going to be easy, given the number of consumer behavior obstacles that need to be overcome in order to implement this type of solution effectively. Our tipping culture makes it very uncomfortable for a waiter or waitress to stand at the table while you complete the checkout process.
Additionally, most pay-at-table hardware is prohibitively expensive for many small to midsize restaurants. On top of that, you have the complexities of syncing these terminals with the POS system. We are working on a number of alternative solutions to address this challenge, but it is yet to be seen which of these options will be the answer.
Do you expect an uptick in card not present fraud? As it becomes more difficult for criminals to use counterfeit cards in-store, there will likely be shift to card-not-present fraud. However, I think that overall fraud is going to be reduced industry-wide due to the push towards EMV. This is especially true for most of Harbortouch's customer base. The small and midsize merchants that Harbortouch typically supports were never really that vulnerable to counterfeit card fraud since it is not very common for a stolen or counterfeit card to be used in a sit-down restaurant or mom-and-pop retail store.
Most fraudsters are targeting "big box" retailers or trying to purchase prepaid credit cards with their counterfeit cards. They are not sitting down for a meal and waiting to see if the police show up. So generally speaking, the liability shift should have a minimal impact to our customer base.
Do you think EMV is going to be effective in securing the U.S. payments system? There is no question that EMV should diminish the effectiveness of counterfeit credit cards. That stated, it still doesn't offer the same level of security that tokenization and end-to-end encryption can bring to the U.S. payments system. Basically, EMV is a step in the right direction, but we certainly expect it to be overtaken by tokenized mobile/digital wallet payments in the near future.
What advice do you have for agents regarding EMV and their merchants? Stop creating panic. Understand the implications of the EMV liability shift and explain the situation properly. There are far too many merchants and agents panicking because of their poor understanding of the EMV liability shift. The best thing for the entire industry at this point is for everyone – merchants, processors, banks and ISOs/agents – to educate themselves on what EMV really means.
Cliff Teston, Signature Card Services
- Education is powerful, and that's where we started with our EMV road map. Luckily, we learned about EMV early in the game and immediately informed our team about the standard, its historic implications and challenges. Our staff, in turn, spread the knowledge to merchants and agents.
About three years ago, we published a comprehensive guide to EMV for our customers and partners. We started to deploy EMV-capable terminals to new merchants as a part of our free terminal program two years ago. To further our EMV readiness, we added an enhanced processing platform to accept and process EMV transactions prior to Oct. 1, which only added more value and support to our merchants.
Even though we are very familiar with the subject, there are many gray areas that we have yet to uncover. In fact, we reached out to our partners and vendors with specific questions, and, to our surprise, there did not seem to be any clarity out there either.
Unfortunately, we recently faced unforeseen challenges. First and foremost, one of our processing platforms was unable to support EMV by Oct. 1 for specific – very common – types of equipment that we deploy. These terminals won't be supported until the end of the year. Secondly, the wait time to build a file or reprogram a terminal is 40 minutes to 2 hours due to high demand. It's impossible to factor that kind of time into any smooth operation, let alone an epic conversion. Thirdly, as we all know painfully well, there is an equipment shortage.
We remained positive despite these beyond-our-control difficulties, and responded by revisiting the power of education. We put together real-life FAQs for our merchants and agents to clear the air about EMV. The FAQs cover liability shift-related uncertainties, dip versus swipe, chip and signature versus chip and PIN, and so on. We believe that the information is educational and extremely beneficial. The Green Sheet readers are welcome to reach out to us any time to borrow our FAQs.
- Purely based on the historic data, we expect fraudulent activity to shift to the card-not-present environment as a direct result of EMV implementation. To address the rise in online fraud, we are actively searching for stronger authentication protocols. We focus our efforts on producing such tools for our online clients to provide a powerful response to identity theft and fraud by developing and launching our own voice biometric-based system – vocaOne (http://vocaone.com). This system accommodates all platforms and offers a family of biometrics-based solutions and services that will significantly improve the dependability of authentication processes.
- We are hopeful and positive. We realize that it will take time for face-to-face fraud to decrease, but EMV– if done right – should get the job done like it did in the rest of the world. We will have to be aggressive and inventive in implementing additional security measures in card-not-present transactions to address the fraud migration. Things will get much worse before they start getting better, but eventually we will see a safer and more innovative payments system in the United States.
- As we all know, the move to EMV is not mandatory, and we get a lot of phone calls from well-informed merchants and agents pointing that out. However, we strongly encourage our agents to support our merchants in converting them to the standard, as historic evidence points out that EMV does lower fraud, and we want all of our agents and merchants to play their role in making our industry safer.
We do everything we can to play our part in reaching that goal by offering a no- or low-cost migration for merchants who want to move forward. To help the undecided merchants ride out the liability shift limbo without casualties, we advise our agents to encourage them to go back to the basics and to focus on stricter cardholder verification protocols, the way it used to be done.
Jeff Thorness, Forte Payment Systems
- No, I think there is still a very large percentage of the smaller merchants that haven't yet made the leap to EMV as of yet. We have developed an application for the Verifone Vx series which will allow merchants to accept EMV payments. The solution can run in stand-alone mode, or it can be part of an integrated solution by connecting to the terminal via a serial cable.
- I think that there will be some uptick in the coming months that will increase as more and more merchants complete their EMV implementation. Online merchants must prepare for this uptick by increasing their fraud prevention efforts and resources. Online merchants that fail to invest will run the risk of increased losses due to fraud.
- I think EMV is one step toward this goal, but definitely not the complete solution. Additional solutions such as point-to-point encryption (P2PE) will need to be layered on top of EMV in order to cover the many dimensions of protecting the U.S. payments system.
- Education and a consultative approach are vital. Merchants need to understand all of the risks and potential impacts of the liability shift and protect themselves from the forces that will be looking to exploit the weakest links in the payments infrastructure. Agents who adopt these strategies will benefit in building these types of trusted relationships for the immediate sales opportunity and additional opportunities (referrals, cross-selling, etc.) down the road.
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