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Despite the hoopla surrounding EMV acceptance, and the constant promotions from acquirers and payments providers touting EMV-capable equipment, at least one acquirer, Square Inc., continues to believe there is a market for magnetic-stripe readers.
A direct-mail piece from Square mailed late last week touts its magnetic-stripe reader along with its chargeback-protection feature.
A Square spokesperson says there is still a role for these devices, which connect to smart phones and tablets via the device’s audio jack, since not all cards in consumer wallets have chips yet.
Indeed, Visa Inc. says in June chip cards accounted for 39% of the approximately 725 million U.S. cards in issue that bear the Visa brand. In May, MasterCard Inc. said 68% of its U.S.-issued consumer credit cards had chips. Overall, MasterCard said there are 383 million cards, including credit and debit, with its brand as of March 31.
Offering a magnetic-stripe reader remains important because of the deliberate pace of chip card issuing, Square says. “We’ve always offered free equipment,” the spokesperson says. “This is just one way to get the seller started.”
Some suggest there are other reasons for promoting the devices.
“They have them in stock,” says Adil Moussa, principal at Adil Consulting, an Omaha, Neb.-based acquiring consultancy, who notes that he received the Square direct-mail piece promoting the mag-stripe reader. They are cheaper to make than more complex EMV and contactless readers, Moussa says. Square last year announced a contactless chip card reader that sells for $49. It also offers a chip card reader without the contactless function for $29.
“The other thing to keep in mind is that it is smarter to acquire a new merchant cheaply and once the merchant is processing and ‘live,’ you can eventually upgrade them when the new readers are available,” Moussa says via email.
The chargeback protection is offered at no cost. It covers what Square calls “eligible” chargebacks up $250 or less and is limited to $250 per month. The service is meant to ease the dispute process for many merchants, Square says.
