Why and How Operators Should Migrate to EMV-Compliant POS
A lower risk of chargebacks is one reason to board the EMV train
October 1, 2015 marked a major milestone for merchants, including hospitality operators. On that day, liability for fraudulent counterfeit credit and debit card transactions shifted from issuers to merchants—unless those merchants have in place POS technology that accommodates transactions completed using microprocessor chip (EMV)-enabled credit and debit cards manufactured in compliance with the EMV (Europay/MasterCard/Visa) standard. Five strong rationales support a move to an EMV platform in keeping with this EMV liability shift:
1. Increased transaction security and decreased liability for fraudulent transactions:
The microprocessor chips embedded in EMV-enabled cards store information securely and carry encoded security credentials. This helps to prevent fraudsters from creating counterfeit cards (“cloning”)—a benefit that doesn’t exist with easy-to-duplicate magnetic stripe cards. EMV also bolsters transaction security by leveraging advanced transaction authorization, card authentication, and cardholder verification methods.
2. Lower chargeback volumes:
Chargebacks are incurred by merchants when customers decline or dispute seemingly fraudulent charges. In addition to the dollar amount of disputed transactions, merchants can incur bank fees of $5 to $25 per dispute. Their business credit can suffer, and they can lose business capital should their bank “freeze” and “lock up” funds in their credit card deposit accounts. The ability to read chip cards using EMV-compliant POS technology reduces the likelihood of fraudulent transactions, resulting in fewer chargebacks and a lower risk for chargeback consequences.
“The chance to avoid chargebacks is reason enough to install a POS system with EMV capability,” says Brian O’Shea, owner, SOYO Craft Bar, Yonkers, N.Y. From January through early October of 2016, SOYO Craft Bar incurred a total of $10,000 in chargebacks, with multiple disputes received weekly, the operator notes. O’Shea addressed the problem by installing the Revention Payment System (RPS), an EMV-compliant POS solution from the company of the same name. No new disputes have since been reported.
Much the same is true for Houston-based nightclub and sports bar operator August Hospitality Group, which implemented the system in its three locations in early October 2016. Prior to the rollout, the three-unit operation was hit with $3,000 to $5,000 worth of chargebacks per week. “For the entire first month with the system, we received just two chargebacks—for a grand total of $27,” states Todd De La Garza, managing partner.
3. Fewer additional financial repercussions:
MasterCard exempts merchants from 100 percent of account data compromise penalties if at least 95 percent of MasterCard transactions that originate in their stores are completed on EMV-compliant POS terminals. Meanwhile, Visa holds “the party that is the cause of a chip card transaction not occurring” (e.g., a merchant whose terminals are not EMV-compliant) liable for any resulting card-present counterfeit fraud losses.
4. Opportunity to build a future-proof payments infrastructure.
The popularity of contactless payments and mobile loyalty and couponing programs is increasing. All of these are powered by near-field communications (NFC) technology, which allows two devices, such as consumers’ smartphones and merchants’ POS terminals, to communicate when they are in close proximity of each other. Many EMV-compliant systems accept contactless payments and, as such, have built-in NFC acceptance capability that makes them future-proof.
5. Increased potential to attract customers
: Today’s increasingly security-conscious consumers are more inclined to patronize merchants that can accept chip cards than those that cannot. Many U.S. merchants also want to better cater to visitors from countries where chip cards are the norm. A move to EMV-compliant POS technology also makes it easier to attract foreign customers who are accustomed to the security of chip cards and are reluctant or unwilling to revert to magnetic stripe transactions.
Just as imperative as understanding the importance of migrating to an EMV-compliant POS system is exercising due diligence in finding the right option. Here are the features hospitality operators should look for in a POS system:
Re-configuring POS systems to accept EMV payments can be a logistical nightmare; there is no guarantee that all components of the system will properly interface with each other unless a POS system is EMV-compliant rather than merely EMV-ready. This was among O’Neal’s reasons for choosing the Revention system.
2. Fully integrated configuration.
Integrating an EMV-compliant POS system with a payment processing platform ensures that transaction information flows seamlessly from the POS to the processor, without the risk of “lost” transactions or the need for nightly batching. Additionally, processing transactions is easier, more efficient and again, seamless, when the system is fully integrated with other components, such as a chip card reader and gift card solution.
3. Accepts contact and contactless payments.
Today’s customers demand fast service—and contactless payments powered by NFC technology allow hospitality operators to meet or exceed these expectations at the POS. Consumers are also embracing mobile wallets, such as Apple Pay, Android Pay, and Samsung Pay, making contactless payment acceptance capabilities more important than ever. Additionally, merchants must install POS terminals that accommodate both contact and contactless payments in order to qualify for relief from certain requirements set forth under the Payment Card Industry Data Security Standard (PCI DSS), as well as for immunity from the liability shift.
4. Leverages point-to-point encryption (P2PE).
P2PE makes sensitive data unreadable from the time it is captured at the POS to the time it reaches the processor, protecting it from hackers. This reduces the scope of components that are considered part of the cardholder data environment, simplifying merchants’ compliance with the PCI DSS.
5. Removes the POS from the scope of PCI compliance.
Taking the POS solution out of the scope of PCI compliance requirements greatly reduces merchants’ responsibilities. The payment application system is connected directly to the Internet, and no electronic cardholder data is stored within the POS. PCI compliance scans of the POS are no longer required, saving merchants time and money.
The Revention Payment System offers all of the above features—and others. To learn more, click here www.revention.com/company/payment_security