Small Merchants in No Rush To Migrate to EMV: Survey

As the U.S. payment card industry continues its monumental shift to EMV chip card technology, one group of merchants will lag. More than 70% of small merchants will not be EMV compliant by Oct. 1, the date the card networks have set to shift liability for point-of-sale fraud to unprepared merchants, finds a survey from 451 Research LLC.

Among merchants with fewer than 20 employees, 37% did not plan to have EMV POS terminals by Oct. 1. Thirty-five percent say they have no plans, but are considering EMV acceptance but have no timeframe in mind for doing so.

Fielded in March, the survey included 150 businesses with fewer than 20 employees. This comes as many of the larger merchants, such as Target Corp. and Wal-Mart Stores Inc., already have EMV terminals or are on track to have them by October.

Three impediments contribute to the small-merchant situation, says Jordan McKee, the 451 Research analyst who wrote the report about the survey.

The first is limited awareness among small merchants. As payments-industry participants, such as Visa Inc. and American Express Co., embark on education programs, McKee suggests they may be a little late. “Those are things they should be doing, but I almost wonder if it’s too little, too late,” McKee tells Digital Transactions News. “We’re in the home stretch now. This is education that should have started happening before now.”

Another factor is the lack of a return on the investment in the new—to the United States at least—payment technology. “The business case simply isn’t all that great,” McKee says. The chargeback and fraud rates for many merchants, especially those in the quick-serve restaurant space, already are low. Additionally, small merchants only have so much capital. There may be other more pressing priorities, typically associated with making the business operation more efficient.

The third element is that merchants are inundated with sales pitches, and not just from independent sales organizations, acquirers and independent software vendors, McKee says. Pitching EMV technology “sounds a lot like things they’ve heard in the past,” he says. “I’m not sure if the message is resonating.”

To make the message stick, merchant-services providers might lead with a mobile or tablet-POS approach, he says. “As a payment-service provider, going into these small merchants, the story shouldn’t be about upgrading to EMV,” he says. “It should be there’s a lot of traction with Apple Pay and mobile payments.”

In the survey, 13% of small merchants already accept Apple Pay, with 18% planning to accept it within 12 months and 28% considering acceptance. Forty-one percent have no plans to accept it.

Payments companies should capitalize on that interest with sales pitches emphasizing mobile payments, and then adding that the POS device also is EMV compatible, McKee says. EMV almost takes a back seat to the mobile proposition, he says.

Similarly, a sales pitch could focus on tablet-based POS systems and all of the business-management tools, such as customer relationship management and sales reports, that they can offer, he says. “When you communicate that story, that’s a message that resonates far better than adopting a new countertop terminal.”