It’s been nearly a year since the EMV liability shift took place last October, and while it seems more consumers are actively using their chip-embedded payment cards, it appears that the EMV standards are actively backfiring with small businesses. The CAN Capital Small Business Health Index shows that small retailers are turning away from EMV at increasing numbers, and are increasing their acceptance of mobile payments systems for customer payments.
The study revealed that about 34 percent of small businesses (about one in three) are currently accepting mobile payment options like Apple Pay and Android Pay, a huge increase over the April 2015 index, when about 13 percent were actively accepting mobile payments. While an interesting statistic, it is even more telling when juxtaposed against the percentage of small business respondents who said their point of sale systems are actually EMV compatible – just 27 percent. This is despite the huge risk in liability, particularly for small businesses who aren’t EMV compliant. Despite the risks, the Index shows that an overwhelming majority of small businesses – 70 percent – do not plan to invest in any type of new payments technologies in the next 12 months.
CAN Capital CEO Daniel DeMeo told Mobile Payments Today, “It's concerning how many small businesses are leaving themselves open to paying for liabilities and losses from potential credit card fraud. By working with payment processors, small businesses should work out a plan to upgrade their payment systems both to protect themselves and to better serve their customers."
DeMeo considers these developments to be concerning, saying small businesses should work with payment processors to upgrade their systems so that they will be better able to protect themselves and serve their customers. An article in Payment Week states that the rejection of EMV by small businesses could actually have an adverse effect on the industry as a whole, causing the larger retailers who have accepted EMV to wonder why they are even bothering with it.
Just how liable businesses are if they decide to ditch credit cards altogether in favor of mobile payments is unclear, but it appears to be an unexpected workaround to eliminate EMV liability. The fact that many businesses are willing to risk the liability shift is of great concern to payment processors, and it is one they need to address as quickly as possible. Payment processors need to make the move to EMV easier and cheaper for small businesses, so rather than eschewing the chip cards altogether, they welcome them as part of a customer-driven, convenient payment mix.
Time will tell if mobile payments will become preferred over EMV in the long run. Mobile payments are certainly seeing increased use, but the overall market share is still very small when compared to other forms of payment. And they are more convenient than EMV – mobile payments only require a quick tap on the payment terminal, the speed of which is familiar to customers accustomed to the “swipe and go” method of traditional magstripe cards versus the necessity to leave the EMV card in the payment terminal until the conclusion of the transaction (Mastercard and Visa have developed ways that may speed up EMV transactions, so that they are closer to the quickness of old magstripe cards). However, given the number of smartphone users out there (and with every smartphone having some sort of mobile wallet preinstalled), the potential customer base is huge. Plus, news of PayPal’s implementation of NFC payments within its own app only increases that potential customer base. Payment processors would like to see the majority of customers using EMV payment cards, but whether EMV or mobile payments wins out as a consumer’s preferred method of payment is up to the consumer. Meanwhile, it is wise for merchants to become equipped to accept both mobile and EMV payment methods – after all, it’s about serving the customer.