Digital Transactions Authoritative, insightful and timely information for payments professionals
As Independence Day nears with all its festivities, fireworks stores are preparing for their largest selling season of the year with EMV chip card acceptance.
It evoked a sigh of relief from Bill Weimer, vice president and general counsel of Phantom Fireworks, when the company’s point-of-sale system achieved EMV compliance. “The biggest problem we had was getting chip-compliant,” Weimer tells Digital Transactions News. Youngstown, Ohio-based Phantom Fireworks operates more than 75 permanent locations and more than 1,500 seasonal tents and stands. “At this point all of our showrooms are chip-compliant,” he says, but the temporary locations are not.
EMV was a struggle for the company’s POS system, Weimer says. He was told several times the system was compliant, only to learn that another issue had cropped up. “They kept telling us next week, next week, next week. Fortunately, we made it in time for this season.”
EMV compliance is important because of the level of fraud associated with magnetic-stripe-only cards, Weimer says, and that caused issues with chargebacks. “It was pretty difficult to win a complaint when we were not chip- compliant,” he says. Chargebacks have surfaced as a hot-button issue for many merchants, especially those lacking EMV-acceptance capabilities.
“Our chargebacks last year exceeded six figures,” Weimer says. To date, the company’s chargebacks are tracking well in comparison to last year, he says. The bulk are expected now and July 4.
In addition to chip card acceptance, which stems the possibility of a criminal using a counterfeit card at the point of sale, Phantom Fireworks also instituted the practice of not keying in card numbers if the payment terminal does not accept the chip card. “If the chip doesn’t work, the sale doesn’t go through,” Weimer says. More than half of the company’s sales are made with payment cards.
Another benefit of accepting cards is that it eases some of the worry about a robbery, says Mike Collar, president of Prairie Village, Kan.-based Winco Fireworks, which operates its stores as Pyro City.
“When you’re doing a seasonal business and have to hire a lot of seasonal employees, you would rather have credit cards than cash,” Collar says. Without a lot of cash on hand, the worry over being robbed lessens. “It’s almost worth the safety of our employees,” he says.
In its 50 seasonal and 50 permanent locations, Collar says, Pyro City operates on the Clover POS system from First Data Corp. The system accepts chip cards.
Fireworks stores also can be lucrative for acquirers and independent sales organizations. While the risk they present is not dissimilar to that of any other short-term merchant, such as a Christmas-tree lot or Halloween store, they do have some unique issues, says Ken Musante, president of Eureka Payments, Eureka, Calif.
The issue with all of these is they may or may not be an established business with a track record. Because they are short-term, there is a flight risk, and there may be no verifiable lease or utility-service report, Musante says.
“Because they are card-present, however, the risk is less but it certainly still exists,” Musante says. “Because the accounts are short-term, it [can be] difficult to recoup the costs required to set them up. As a result, a payment facilitator might be the best solution for these client types.” Payment facilitators are third-party agents that may sign a merchant agreement on behalf of an acquirer and receive settlement funds on behalf of a sponsored merchant.
“Eureka Payments does have a program for these [temporary merchants] within our footprint but we don’t get many takers,” Musante says. “There is a small setup fee and the rate is slightly above a normal retail rate but below what a payment facilitator would charge.”
