The Green Sheet Online Edition
October 26, 2015 • Issue 15:10:02
After the deadline, MLSs share thoughts on EMV - Part 2
In the first article in this two-part series published in The Green Sheet, Oct. 12, 2015, I shared a portion of responses to questions about EMV sales that I posted in GS Online's MLS Forum. This article contains further perspectives from forum members.
Here are the questions I posed:
- Are you being pro-active contacting your merchants about EMV compliant terminals?
- 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.)
- 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?
- Assuming you have been proactive contacting merchants, were they educated already about EMV?
- If they weren't aware of the EMV issue, was it a difficult "sell" – to explain that this was really coming in October, etc.
- Did you aggressively prospect new clients, assuming that their existing processors had not upgraded their old and outdated terminals?
Not a mandate
Getting the discussion rolling, Bigred_dave wrote, "We have been very successful with the 'this is not a mandate' opening. We have found many merchants being bombarded with you 'MUST upgrade or else' tactics, and merchants are so pee'd off with the scare tactics that by opening our way, we get the merchant to listen.
"Once we engage the customer, we then recommend upgrading by fully explaining the liability shift and how it could impact their business as it pertains to fraudulent charges. We have had great success by just being truthful with them. We then go into our features, benefits and why we feel we're the best solution for them and guide them to signing with us.
"No bells, no whistles, no smoke and mirrors."
Tip adjustments problematic
Sharing his experiences and concerns, kmusante wrote, "We have made the decision to supply terminals to all card-present merchants at no additional charge. We are not including small-ticket and fast-casual merchants as the EMV transaction is substantially slower, and it will be a disservice to these merchant types. For the ones we are upgrading, we have them acknowledge the terminal is ours, and they may use it so long as they are processing with us.
"We purchased a large quantity of 520s and got them at a very reasonable cost. We are upselling the 805 if they want to be able to accept contactless devices. The concern we have is on restaurants and tip merchants. Our processor does not allow for tip adjustment on EMV transactions on all terminals. This a big deal, as most restaurants will not be able to work in this manner. I am told some processors and terminals do allow for this. We are investigating other terminal types to see if they allow for tip adjustment with an EMV. If not, restaurants will not want the upgrade."
CardConnect said he was answering the questions from the perspective of an ISO. "I believe the topic of EMV starts with educating merchants about the program," he wrote. "Unfortunately, there is a lot of misinformation about the topic spreading and being used by either dishonest or uneducated MLSs. Here is what we know. The liability shift for fraudulent transactions occurs in October. We also know that processing a transaction with a chip is a much slower process than swiping a card, meaning it may not be right for all businesses.
"We also expect that the U.S. payment infrastructure will not be ready by the October deadline, as it is estimated that by year end 80 percent of POS devices will not be able to process a card with a chip, and 60 percent of debit cards and 30 percent of credit cards will not have chips. Finally, with the introduction of EMV here in the U.S., the expectation is that fraudsters will move to the online market.
"In summary, there is much hype surrounding EMV, and merchants are getting confused and are not sure what to do. Therefore, this is a tremendous opportunity to solidify your relationship with your merchants through education. It also provides you with the opportunity to introduce new products and services. At CardConnect we are introducing new terminals that are not only EMV compatible but support NFC and offer point-to -point encryption."
Truth wins out
CardPlayer made a succinct point: "Here is part of the problem ... there is no mandate or requirement that merchants adopt EMV by October. The only thing that happens is that the merchant assumes liability for fraud cards after that date."
Forum member ncrum added, "Finally someone who gets it. Geez. We really have a trade publication and many in the industry who think this is a mandate? And we are all acting like starting October 2015 the merchants are all of a sudden responsible for fraud. They have been responsible for fraud all along. So, unless they have been hit with card-present transactions that are fraudulent, then why worry about all this nonsense?
"It irritates me that my merchants have called me saying they have been told they are not compliant, etc., etc. Boy, are they glad I hold their merchant account after I talk with them. The big opportunity for me is that by telling them the truth and not selling them something someone else said they must have, they have even more trust and confidence in me, and that I look out for what is best for them, than ever. Thanks EMV.
"One question I have though is this: I have put two customers on EMV. They both ask me to turn it off because it is too slow and they are really not worried about fraud. When I installed them, the merchant has to put the card in the slot and then removes it and the terminal then asks: 'does the signature match'- yes or no. The merchant has to answer that question. I see large retailers allowing the customer to insert the card and never does the merchant verify that the signature matches.
"Seems like to me if the merchant does not verify the signature matches, when the card issuing bank sees the signature does not match on a fraudulent transaction, they may have the right to deny the transfer of fraud liability because the merchant did not process the card correctly? So do they need to verify the signature on the card or not?
"That is very possible, but if that is the case, I just don't get the fraud liability shift. So I can pick pocket someone's wallet, go buy anything with a chip card, the merchant never sees my credit card because I, the consumer, insert the card and I don't have to sign anything, and the card issuing bank pays each time I do this since it is fraud. This makes no sense to me but what do I know?"
William Hamilton began by expressing gratitude. "Thanks so much to all those who contributed insight into EMV stipulations," he wrote. "I have several merchants who appear unreachable, and to compound matters, one of our processors has not notified any merchant regarding this matter to date.
"Does the agent bear any legal responsibility if the merchant gets a chargeback because of lack of EMV compliance should a merchant pursue restitution in court? Is the processor liable for lack of notification? Thanks for any feedback regarding this matter."
Marinesteban responded to William Hamilton, as follows: "Short answer, no, because the agent is not part of the merchant agreement; with that being said, the merchant can still try to sue the agent if they feel wronged, but unless there's something in writing, it's a futile exercise."
As always, I appreciate the feedback from the respondents. Only time will tell how the EMV saga will play out. Stay tuned!
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 email@example.com; his websites are www.jeffshavitz.com and www.trafficjamming.com.
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