Why you should , and what ’ s ahead
“ There even could come a day when no one even carries a credit card any more .”
Technology BY TOM EPSTEIN
Got EMV ?
Why you should , and what ’ s ahead
The chip card ( EMV ) deadline passed in October 2015 . Yet according to industry accounts , fewer than 50 percent of retail and restaurant outlets were set up by the end of December 2016 to accept cards this way . Since readers of this magazine are both franchisees and consumers , I will address both sides of what is going on with chip cards .
As a consumer , you are likely a bit upset with longer , slower lines in stores because of the additional time it takes for EMV transactions to clear . And as a business owner , you are likely seeing more chargebacks than ever before . But wait , wasn ’ t EMV supposed to reduce fraud and potential chargebacks ?
Well sort of . The U . S . is the last of the G20 nations to adopt EMV . And , in our infinite wisdom , we mostly have rolled out only chip-and-signature technology , while the rest of the world is using chip-and-PIN .
What ’ s the difference ? With chip-andsignature , someone could still steal your card , use it at a retail establishment and just sign it . No new real security here . As such , there is still a risk of fraudulent transactions at the POS . With chip-and- PIN , there is very little risk of this as the would-be thief would not know your PIN ( unless you wrote it on the card ).
So why did the banks bother at all ? So they could protect themselves from the larger risk of someone hacking an entire system . Data transmitted with a chip card is much more secure than with a magnetic stripe .
Back to those pesky POS transactions and increased chargebacks . The banks have not been aggressive in shipping cards with chips . Why would they be ? If they reach a penetration rate of 75 percent of all cards used by merchants , the entire risk migrates back to them . Currently , about 65 percent of all cards in circulation have a chip in them . So the banks have bought themselves an extra year or two .
What about franchisees ? Why haven ’ t more implemented EMV readers ? The POS companies see this as a great way to earn additional hardware money ( and in some cases , SaaS fees ). So franchisees and their franchisors are weighing the cost of the new hardware and software against the rise in chargebacks . But be aware : as more EMV cards enter the marketplace , you will get more chargebacks unless you upgrade !
“ There even could come a day when no one even carries a credit card any more .”
Quick service restaurants in particular are hesitant to embrace EMV readers because of increased transaction time . On average , EMV transactions take 20 to 25 seconds , compared with just 1 or 2 seconds for swiped transactions . This makes a big difference in getting people through the line during a breakfast or lunch rush . As I ’ ve noted before , I am betting this issue will start to push a much safer and faster method of payment using NFC technology ( near-field communication like Apple Pay , Android Pay , and Samsung Pay ).
Table service restaurants have had to invest in expensive pay-at-the-table type solutions . However , the good news here is that technology is finally catching up , and we are seeing new hardware options coming out rapidly and getting cheaper to implement .
Membership businesses like health clubs , tanning , massage , and lashes salons will have to factor higher chargebacks into their business models . Businesses where customers book online for even one-time appointments also will see higher chargebacks since a customer can ’ t present a chip card when booking these services . However , they can lower their risk and minimize chargebacks by working with their software provider and payment pro-
cessor to make sure they are passing on all the data needed in those transactions .
Some of our clients that use proprietary software pass on only the minimum information needed to charge a credit card . But by passing on a customer ’ s street address , ZIP code , and if necessary , tax amount , you not only will reduce your chargebacks , you ’ ll also get lower interchange rates from the processors . All “ card not present ” business models , even if they actually see the customer and are not really e-commerce , will see more chargebacks as fraudsters will naturally migrate toward these businesses .
Mobile franchises , such as handyman services , are getting much more involved in accepting payments from smartphones and tablets . The hardware providers are just now catching up , and we will start seeing EMV readers that connect to smartphones using Bluetooth or other technologies . However , these are not cheap , and it is likely that the practice of giving the readers away free will disappear . ( I would expect to pay between $ 150 and $ 300 for these .) But assuming fairly large average tickets here , the saving of just one chargeback will more than pay for the new device .
We are at the point where any franchisee with “ card present ” transactions should be looking at adding EMV readers . But please , do yourself a favor and make sure you have NFC in place as well , as I truly do think this is where we will end up in the U . S . NFC is much safer and faster than chip-and-PIN , and a growing number of consumers have a mobile wallet in their smartphone — and even if they are not using it today , people will soon learn not only that they can get through lines more quickly , but also that they will have a much lower chance of having their card numbers stolen . There even could come a day when no one even carries a credit card any more . No more George “ Seinfeld ” Costanza wallets !
Tom Epstein is CEO and founder of Franchise Payments Network , an electronic payments processing company dedicated to helping franchisors and their franchisees improve system performance , increase revenue , and reduce expenses . Contact him at tomepstein @ franchisepayments . net or 866-420-4613 x1103 .
72 MULTI-UNIT FRANCHISEE ISSUE I , 2017