By John Rozek –
With most regions in the world already adopting EMV – or Chip and PIN – payment solutions, there is now tremendous pressure on the US to join the likes of Canada, the UK and the rest of Europe in adopting this more secure technology, in order to combat increasing levels of customer-present fraud. The question is no longer will EMV will hit US shores, it’s when.
The introduction of EMV, a global standard for inter-operation of integrated circuit cards (IC cards or “chip cards”) and IC card capable point of sale (POS), is a significant change for US retailers, and one which will affect them greatly; it is not surprising, therefore, that many are nervous about the move.
Cost of Implementation
Undoubtedly, one of the most significant impacts on the country’s retailers will be cost and technical complexity of implementing and running EMV solutions. The implementation cost alone can be very significant and includes the software upgrade, the purchase of PIN pads and the cost of accreditation. Retailers running their own payment systems will face much higher costs. Not only will they need to ensure that they have technical staff who are skilled in both EMV and their chosen vendor’s solution, they will also need to bear the cost and effort of PCI DSS (Payment Card Industry Data Security Standard) accreditation. These retailers will, however, benefit from greater control over their point of sale processes and will be able to architect their payment infrastructure to ensure the fastest possible transaction speeds–a key feature for multi-lane supermarkets in particular.
Larger retailers will be able to absorb these costs. Others, however, may find that the cost of running their own systems becomes excessive once EMV is introduced. This will almost certainly be the case for small and mid-size retailers and may even be true for some larger retail organisations. When EMV was introduced to the UK in 2003 we saw a lot of retailers move towards hosted solutions; we can probably expect to see similar trends in the US.
To Host or Not to Host
Retailers who go down this route have two options–a hosted solution, or a shared hosted solution. A hosted solution is where a merchant processor runs a retailer’s payment system on their behalf. This still allows the retailer to retain many of the benefits of running their own system, but greatly reduces the cost and effort associated with PCI DSS accreditation. A shared hosted solution, on the other hand, is a low cost, ‘pre-accredited’ solution that is shared by several retailers. Pre-accredited means that the solution was approved when it was first introduced and new retailers can be added to the service with minimal formality. It allows retailer to accept payments in the simplest and cheapest possible way.
Whichever route they choose, US retailers will face some significant challenges over the next couple of years. In many ways they are in a better position than the early adopters of Chip and PIN; the technical standards behind EMV are much more mature and are now well understood, and expertise in this area is plentiful. On the other hand, with interest in mobile payments continuing to rise, the US retail market faces a double whammy. Not only do retailers have to start thinking about implementing EMV solutions, they also need to carefully plan their payments infrastructure so that they are able to embrace emerging technologies. The key to success is most definitely careful planning. Retailers need to start thinking now about how they react to these changes and they need to do this sooner rather than later.
About John Rozek
John has over 18 years of experience working at the forefront of the payments industry. Working with Royal Bank of Scotland and NatWest, John led an industry leading cross-border implementation and ATM service delivery programme. He also led the team that introduced Chip and PIN to over 120,000 points of sale across UK. John was one of the founding members of Polar Moment and has played a key role in developing the organisation to become a leading provider of payments consultancy. He is a recognised name across the sector, delivering payment industry consultancy and business development services.Chip and Pin, EMV