EMV in the U.S.: Pros and Cons from the Merchant Perspective

EMV stands for Europay, MasterCard, and Visa. EMV is the global standard for inter-operation of integrated circuit payment cards and point-of-sale terminals and ATMs. EMV cards are often called Chip or Smart Cards because they are processed by reading information off of a microchip embedded in the card rather than by reading information of a magnetic strip. The Card Associations, Visa, MasterCard, Discover, and American Express, have released timelines for merchants move from processing payments on magnetic strip cards to processing payments on EMV cards by 2013. 

Migrating to EMV will require a massive and expensive upgrade to existing terminals, POS systems, and ATM machines. What are the pros and cons of EMV migration from the merchant perspective?

Cons:

  • Purchasing new or upgrading existing terminals and POS systems will be expensive. Magnetic strip reading terminals have proven to be incredibly hardy and long-lasting. It's not uncommon for merchants to process sales on equipment that is 30 + years old with no issues. Many merchants have seen no reason to upgrade equipment thus far, and will view EMV terminals as an unnecessary and costly expense. Magnetic strip terminals are widely available, plentiful, and inexpensive, with many used and re-furbished options available. EMV terminals, at first anyway, will only be available new. They are also significantly more expensive to manufacturer, which will limit merchant service providers ability to subsidize merchants' expenses for upgrades, or simply give away equipment, particularly dongles used with smartphones.
  • Transaction messaging requirements are different for EMV than magnetic strip sales. More data is sent with EMV transactions. Merchants will need to co-ordinate with their acquirer to support both message types while they continue to accept both EMV and magnetic strip cards.
  • Deployment of EMV will change check-out procedures for cardholders. Merchants and their employees will need to be ready to instruct cardholders on how to insert or tap their cards into or over payment terminals, and be ready to explain the security benefits as cardholders ask questions or complain.
  • New card association policies will likely result in liability shift from issuers to acquirers (and ultimately merchants) in certain situations.

Pros:

  • Conversion to EMV will reduced merchants' losses and associated costs from fraud caused by counterfeit and stolen swiped card transactions.
  • Card Association incentives that provide relief from PCI Compliance requirements will generate cost savings for some (mainly larger) merchants that will offset the terminal and POS conversion costs.
  • Most EMV-capable terminals and POS systems will also be enabled to accept contactless and mobile payments, providing more convience and payment options for customers and faster checkout times.
  • Chip cards and smartphone payments will potentially offer new revenue sources via marketing offers and loyalty programs that can be transmitted directly from the merchant to the card or device.
  • Foreign travelers to the U.S. will be better able to use their EMV cards, enabling more payment options.