AmEx Program Aims To Kick-Start EMV Card Acceptance Among Small Businesses

By Jim Daly

Among the many companies President Obama mentioned Friday as he announced that the federal government would be supporting Europay-MasterCard-Visa (EMV) chip-and-PIN card payments in a big way beginning next year was American Express Co. The president disclosed that AmEx was about to launch a $10 million program to subsidize small businesses’ purchases of EMV-enabled terminals.

While $10 million sounds like a big number, the program at most will affect 100,000 merchants since each business AmEx accepts will get $100 off the price of new EMV equipment, no matter how many locations it has. Still, anything that will encourage small businesses to accept EMV chip cards will be welcome news in the payments industry with a major EMV deadline looming next October and small merchants identified as the clear laggards in the U.S. conversion from magnetic-stripe credit and debit cards to chip cards. Pleasanton, Calif.-based Javelin Strategy & Research estimates that only about 10% of U.S. payment terminals are EMV-enabled, with most at national merchants’ locations.

Anré Williams, president of Global Merchant Services at New York City-based AmEx, agrees small merchants have a long way to go with EMV. Business owners are focused on their businesses, not on payments, he says. “From all of our research, it is the small merchant that is least knowledgeable and has no EMV plans,” Williams tells Digital Transactions News. “The small merchants have a lot of things going on in running their businesses.”

The point of the program is to educate small businesses about EMV and to reduce point-of-sale counterfeit fraud, a major problem with mag-stripe cards, according to Williams. “We simply want to make them aware,” he says.

AmEx hasn’t yet revealed many details about the program, dubbed the Small Merchant EMV Assistance Program and which goes live in February. AmEx is requiring is that applicant merchants accept AmEx cards but not have more than $3 million in annual AmEx charges, and that they not be franchisees. “Those are the only qualifications we have,” says Williams. “That criteria covers the vast majority that accept American Express in the United States.”

Merchants don’t necessarily have to buy a new EMV-accepting POS terminal, but they will have to document that they have either purchased a terminal or peripheral device capable of processing EMV cards. AmEx itself does not sell terminals, which means most merchants will be getting their EMV equipment through bank card merchant acquirers or POS equipment resellers.

Small businesses will have until next April 30 to submit a request for reimbursement. AmEx hasn’t finalized how it will distribute the rebates, but Williams has a pretty good idea. “We’re working through the details now, but mostly likely it will be through a gift card,” he says.

American Express claims to be the largest issuer of credit cards for small businesses through its Open program. The company is planning a marketing campaign for the EMV terminal program that will include information distributed through its Open channels, says Williams.

AmEx doesn’t reveal the size of its merchant base, but a March research report by investment firm William Blair & Co. estimates that AmEx’s base is about 60% to 70% the size of the approximately 9 million U.S. merchants that accept Visa and MasterCard cards. Pegging AmEx at 65% of the bank card base works out to about 5.85 million merchants. AmEx last February announced its OptBlue program that uses bank card acquirers to sign small businesses for AmEx acceptance. Eight of the nation’s top 10 acquirers participate, AmEx said last week at its quarterly earnings call.

As a major international card issuer, AmEx has been issuing EMV chip cards with PIN authentication for 10 years, and last year it began offering chip-and-signature cards to U.S. cardholders. The company’s hasn’t yet decided if it will settle on chip-and-PIN or signature authentication—a point of controversy in the card industry—when it begins mass EMV card issuance in the U.S., according to Williams. “The key to me, and the key to all of us, is if it’s a card with a chip in it, on an EMV-compliant terminal, that’s the way you eliminate the vast majority of counterfeit fraud,” he says.