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Table of Contents

Lead Story

Holidays test merchant, processor relationships

Dale S. Laszig

News

Industry Update

Post fraud liability shift, are your merchants EMV-ready?

Audit clears FDIC of wrongdoing in Operation Choke Point

Girl Scouts folds in Visa, Dell to Digital Cookie 2.0

Payments innovation the topic of EPIC meeting

Features

Durbin strikes again

Infographic: EMV: How ready are U.S. merchants?

The Mobile Buzz: Much ado about Apple

Views

Insider's report on payments: Let's have some respect for checks

Patti Murphy
ProScribes Inc.

Education

Street SmartsSM:
After the deadline, MLSs share thoughts on EMV – Part 1

Jeffrey I. Shavitz
TrafficJamming LLC

Sell business solutions first, processing second

Jeff Fortney
Clearent LLC

Beware of pitfalls associated with EMV migration

James Huber
Global Legal Law Firm

P2PE: Better than ever and vital to data security

Ruston Miles
Bluefin Payment Systems LLC

Company Profile

Mocapay

Moneris

New Products

Increase mobile sales, optimize checkouts

MoovCheckout
Moovweb

Digital cash solution replaces cards at ATMs

Popmoney CardFree Cash
Payment Alliance International

Inspiration

Prequel and sequel

Kate Gillespie

Departments

Letter From the Editors

Readers Speak

Resource Guide

Datebook

Skyscraper Ad

The Green Sheet Online Edition

October 12, 2015  •  Issue 15:10:01

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Street SmartsSM

After the deadline, MLSs share thoughts on EMV – Part 1

By Jeffrey I. Shavitz

During the past few years, we frequently heard about Europay, MasterCard and Visa (EMV) compliant terminals and how our merchants must be able to accept EMV chip cards by Oct. 1, 2015, or potentially be held liable for data breach costs associated with their transactions.

This article is not about all the issues surrounding EMV terminals, but rather about how merchant level salespeople (MLSs) are selling EMV to their merchant customers. The deadline has come and gone, but research indicates the majority of merchants are not yet prepared to accept EMV cards.

The questions

In GS Online's MLS Forum I posted that I would welcome comments from the MLS community to the following questions, as well as welcome any additional thoughts they have about getting merchants EMV-ready:

  1. Are you being pro-active contacting your merchants about EMV compliant terminals?
  2. If your merchant does indeed need a new terminal, are you paying for it 100 percent, 50 percent and asking the merchant to pay for it? (Please elaborate if you are charging the merchant based on the business's monthly processing volume.) If you did purchase many terminals on behalf of your clients, was it a significant enough amount of money to actually hurt your cash flow for the past year? (as an FYI, some of my friends who own ISOs had significant profitability declines due to terminal expenses.)
  3. Has your attrition increased the past six to 12 months due to the fact you are losing merchants that you didn't proactively contact because of EMV and upgrading their terminals?
  4. Assuming you have been proactive contacting merchants, were they educated already about EMV?
  5. If they weren't aware of the EMV issue, was it a difficult "sell" – to explain that this was really coming in October, etc.
  6. Did you aggressively prospect new clients, assuming that their existing processors had not upgraded their old and outdated terminals?

As a quick preamble to set the stage, everyone knows everything about EMV already, right? I don't think so – there is such confusion with the merchants, prospective clients and salespeople selling merchant processing – who knows the truth?

Insights worth repeating

As Ken Musante, President of Eureka Payments LLC and former Street SmartsSM author, so eloquently wrote in "EMV implementation details urgently needed," The Green Sheet, March 23, 2015, issue 15:03:02, "I've sat through several conference calls from hardware vendors and security consultants and they relay similar information. In October of this year, there will be a liability shift such that in the event of a counterfeit card chargeback, the entity with the least secure processing environment will absorb the liability."

From a merchant and ISO's perspective, "[t]his means, if our merchants are not EMV compliant and a counterfeit card chargeback occurs, and the card is an EMV card, then our merchants will be liable," Musante wrote.

This means we have a straightforward action to take: "identify all card present merchants who are likely to accept a counterfeit card and ensure they are upgraded," he added. "This task appears to be linear. We would out-sort all card-not-present merchants, and likely out-sort any quick serve merchants, like bagel shops and bakeries." The thought process being that the quick service nature of their businesses would be interrupted by the new procedure, which requires that cardholders insert their cards for the length of their transactions, Musante noted.

"Further, many quick serve merchants don't have consumer-facing terminals and would have to change their front counter and telecommunications wiring," he wrote. "While this ultimately is the right decision, such merchants shouldn't be the first movers; they'll have the fewest incidents of counterfeit cards, and the risk per incident is relatively low."

Cardholders need to get accustomed to the process at non-quick serve locations.

Further expert insights

Following are perspectives shared by Empire, an industry leader and member of the MLS Forum. Additional comments will follow in the next installment of this two-part series:

Empire wrote, "I don't always respond to Street Smarts; however, this is an important subject.

  1. Are you being pro-active contacting your merchants about EMV compliant terminals?

    "Yes, absolutely. We are offering an upgrade plan for merchants, charging $100 for a PAX S80, which will support EMV and eGiftSolutions. We also have a Reterminalization program featuring the Clover Mini."

  2. If your merchant does indeed need a new terminal, are you paying for it 100 percent, 50 percent and asking the merchant to pay for it? (Please elaborate if you are charging the merchant based on the business's monthly processing volume.) If you did purchase many terminals on behalf of your clients, was it a significant enough amount of money to actually hurt your cash flow for the past year? (as an FYI, some of my friends who own ISOs had significant profitability declines due to terminal expenses.)

    "Some merchants are getting free terminal swaps. Many are involved in the EMV upgrade plan. We really are letting our agents run with it."

  3. Has your attrition increased the past six to 12 months due to the fact you are losing merchants that you didn't proactively contact because of EMV and upgrading their terminals?

    "I'm sure we've had some accounts leave because of equipment upgrades, but most call us or their agents first. We're fanatical about support and retention."

  4. Assuming you have been proactive contacting merchants, were they educated already about EMV?

    "Our attrition has remained pretty static at 10 percent for the last three years. Thankfully, some things we do with our agents and the front-end merchant interaction get them to call into our help desk or CS before making any moves and/or asking questions about EMV. We're able to assist."

  5. If they weren't aware of the EMV issue, was it a difficult "sell" to explain that this was really coming in October, etc.

    "Most, at this point, are aware of the EMV issue because they are getting calls saying, 'If you don't upgrade your machine, you'll be arrested!' or 'If you have a new machine, you will not get any chargebacks ever again!' both of which we know are untrue.

    "The problem is, even knowledge within our industry is, many times, incorrect. We spoke to a 42-location car dealership and they want EMV on a virtual terminal for all their reps to bill customers. They are 'worried about losing chargebacks.' When we spoke, they were entirely ignorant of the liability shift and what it means. They also received five chargebacks last year for various reasons, none were counterfeit or fraud.

    "While there are solutions that will evolve to support EMV, which we explained, we were also frank with them and said, 'You have this customer base coming to see you. You have their names, car type, VIN and are doing all this service work. The odds that a customer will obtain a counterfeit card that was previously issued as an EMV card and now is encoded on a piece of plastic, then that customer (who you know and is in your database) comes in, gets a recall job done on his Jeep, an oil change, new set of tires, and pays with this counterfeit card is zero.'

    "Once he was educated and understood the real impact in the immediate future, he was less gung-ho on an update for all these virtual terminals and is satisfied the other EMV terminals in his location will do just fine. That's not to say he won't have a solution eventually, but he understands the sense of urgency isn't as urgent as he has been led to believe.

    "Furthermore, we had several EMV-education sessions with local merchants to show them an EMV transaction flow and speed. Many of our local coffee shops commented, 'When Starbucks goes EMV, we'll do the same.' (In our area, Starbucks doesn't have EMV-enabled POS yet.) These high-ticket count locations want customers in and out. They will all eventually have an EMV solution, but are much better off now that they have the knowledge to make an educated decision.

  6. Did you aggressively prospect new clients assuming that their existing processor had not upgraded their old and outdated terminals?

    "We don't sell direct, so I cannot answer that."

Stay tuned for the second article of this two-part series on what the industry's feet on the street have to say about selling EMV to merchants.

SIDE NOTE:

Following is a sampling of articles published previously in The Green Sheet that provide additional perspectives on EMV implementation in the United States:

Jeffrey I. Shavitz is Chief Executive Officer of TrafficJamming LLC, which is a virtual business group for entrepreneurs and small business owners to help grow a company's sales (traffic = customers in his language). His experience in payments includes co-founding Charge Card Systems Inc., which was sold to Card Connect in 2012; Alternative Merchant Processing, dedicated to high-risk merchant processing; and Charge Card Funding, involved in the cash advance space. Jeff has published four books: Size Doesn't Matter — Why Small Business is Big Business, which became an Amazon No. 1 top release in both the business and entrepreneur categories; Small Business Aha Messages; The Power of Residual Income – You Can Bank on It!, and Networking – Get Connected. He can be contacted at 800-878-4100 or jeff@trafficjamming.com; his websites are www.jeffshavitz.com and www.trafficjamming.com.

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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