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10/27/2016

Operating in the Era of EMV and Chip & PIN

Since the EMV liability shift deadline came and went in October of 2015, merchants have experienced a rise in credit card chargebacks directly related to the transfer of culpability. Depending on the business, the quantities and amounts in credit card chargebacks could be small, and for some businesses, the problem is becoming a significant issue.

The topic was the subject of a luncheon roundtable that was comprised of: Cathy Medich, Associate Director, EMV Migration Forum, Bill Benz, VP of Information Technology, Ted’s Montana Grill, Mohamed Eloraby, Director of Restaurant Systems, Galardi Group, Steven Bowles, VP of Information Technology, Rubio’s Coastal Grill, Briton Smetzer, Director of IT Operations, Fuzzy’s Taco Shop, Ali Abbas, Director of IT, Oregano’s Pizza Bistro, and Jamie Tallman, IT Director, Jack Stack Barbecue. Following are a few key takeaways from the group including frustrations – the majority of restaurateurs had experienced an average of a 400% increase in chargebacks, plus concerns and a shared urgency to find a solution that will interface seamlessly with POS systems.

CHALLENGES PERSIST
The liability shift affects any business that has not yet implemented the proper equipment to accept EMV credit cards. The reasons operators delay deploying EMV readers vary, but there are common complaints that are pointed to for postponing making a switch.

Processing speeds. Processing EMV transactions takes much longer than magstripe. It may take from 15 seconds, up to two minutes to complete one card to process. In the restaurant industry, this type of delay has ramifications for both operations and customers as slower service impacts workflow and ultimately guest satisfaction. 

Integration. There are a few new vendors that sell POS systems with built-in EMV card readers, but replacing POS systems already in restaurants is not always possible with budgets or resources.

Customer experience vs fighting chargebacks. Without an EMV card reader, it is very difficult to dispute chargebacks, even if there was evidence that the cardholder was present with the EMV card. Some merchants may choose to dispute the larger amounts, but most merchants, especially restaurants tend to absorb the smaller chargeback amounts. It is sometimes just not worth fighting the guest(s) and consuming resources to chase these “friendly fraud” incidents. 
“Friendly fraud” refers to consumers that visit a restaurant and then dispute the transaction with the bank; simply because the business did not process an EMV card with an EMV reader. Filing a police report for repeat offenders does not always solve the problem as police will tell the merchant to speak directly to the banks for resolution. Another modern problem is that there are websites that list restaurants and locations that don’t have EMV card readers or surveillance cameras. Even with a surveillance system in place, friendly fraud remains difficult to prove.

SEEKING SOLUTIONS
EMV certification is a long and expensive process. This is the reason that merchants are looking to their POS companies, processors, and card issuing banks for the solution to EMV processing issues. There are many third parties that are quick to offer a solution, and a lot of them do help with reducing the credit card chargeback issue but would this open up a new issue for the restaurants in reconciling their credit card charges with the third party to the POS system? This is the reason that the interface to the POS is critical.

Tethered vs Wireless. Let’s imagine that we finally have a few EMV certified options available.  Which will work best for one’s restaurant concept? The unanimous vote for table service restaurants is for a wireless solution. Each server should have access to a wireless device to process credit card payments at their tables. It should be noted, that while having a self-service payment device included in a check presenter is a great idea, it could get very expensive. Operators must consider how many devices they will need to purchase for each location and how many devices to which each server will have access. If there aren’t enough payment devices, it could negatively impact the customer experience.  Tethered EMV Payment device work better in quick service environments.  Operators don’t have to worry about the battery life of the payment devices, devices getting lost or stolen, and it will probably require very little training to use.  

Mobile Payment or Tablet at Table. Both mobile payment and tablets at the table are currently in place for many restaurant companies. The success of tableside tablets for self-ordering/payment depends upon a particular restaurant’s culture. With limited IT budgets for restaurant innovation, it is vital for operators to be sure customers will embrace and utilize the technology; otherwise the investment will be a loss that restaurants cannot afford.