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07/19/2016

You Can Speed Up EMV Transactions Today -- But Should You?

You have just helped a customer select the perfect piece of merchandise. Excited about her new acquisition, she pulls out her EMV-enabled credit card and inserts it into the card reader. After a couple of seconds, she pulls it out and puts it back into her wallet -- but it was too soon and the transaction didn’t go through. You have to ask her to insert it again and leave it in place until prompted to remove it.
 
This scenario has played out millions of times since EMV rolled out in the United States last year. The chip reading technology that replaced magnetic swipes created plenty of frustration among retailers and customers alike, primarily due to how long the card must be left in the terminal. This step forward in technology and security ended up moving most retailers two steps back in terms of service and efficiency.
 
Complaints from retailers were swift and loud, prompting the credit card brands to spring into action to fix the problem. Two solutions that reduce the time credit cards must remain inserted have already been released: Quick Chip from Visa and M/Chip Fast from MasterCard. American Express and Discover are currently developing their own fixes. A natural question retailers ask is, “Should I install Quick Chip and/or M/Chip Fast?”
 
Nature of the problem and solutions
 
Before making that decision, it is important to understand what is actually happening inside your card terminal. The reason that EMV readers hold cards is because they are not processed until transaction totals are known, and are not released until authorizations for those totals have been approved. Quick Chip and M/Chip Fast work by creating cryptograms using predetermined transaction totals. The software gets all of the information it needs from credit cards in a two-second long dip and remove action without knowing the actual purchase total.
 
As far as the customer is concerned at this point, the credit card is no longer needed and she can put it away while the transaction is completed. Once the total is known, it replaces the predetermined amount so the correct value is charged to her account and the charge is authorized. In reality, these new solutions do not make transactions go any faster -- they simply allow more of it to take place without requiring a credit card in the reader. That gives customers a very real perception that the checkout process is faster and smoother.
 
Solving the value/service equation
 
Quick turnaround businesses like fast food restaurants, coffee shops, and convenience stores stand to see the biggest advantages because dip and remove gives customers more time to get ready to move out of the way the second a transaction is completed. That makes way for people behind them and helps lines move along, which can skim a little time off the complete process. More importantly, the perception of time savings is amplified among customers that are in a hurry and expect fast and efficient service.
 
However, this savings of just a few seconds can be difficult to assign a value to if you can’t multiply it by hundreds or thousands of customers per day. For high volume discount apparel retailers, speeding up transactions is more important than for luxury stores where service is a core aspect of business and margins are higher. Precisely how much value can be gained from shaving the perception of a few seconds off each transaction is highly dependent upon the shopping environment and experience. Consider your busiest shopping times and think about whether streamlining transactions would have a meaningful impact on the experience you offer.
 
The logistics of implementation
 
Both Quick Chip and M/Chip Fast come in the form of free software updates, but there are two main compatibility issues to understand. First, these updates only work with their respective credit card brands and not with each other. If you install one, it makes sense to install both so both Visa and MaterCard holders get the benefit -- but you are still introducing a disparity where American Express and Discover customers face seemingly longer checkout times. Be ready to implement solutions from those companies as soon as they are available.
 
The second compatibility issue can effectively stop Quick Chip and M/Chip Fast dead in their tracks: Payment processors and hardware manufacturers you work with must support the upgrade for it to work. There are still many payment processors that do not support this new software, so be sure to check both your processor and hardware manufacturer to ensure compatibility. Thus far, this has been the single largest stumbling block to wider implementation of the updates, but Visa and MasterCard both claim to be working diligently to get more partners aboard.
 
Among retailers that are able to upgrade, some are doing so as individual software rolls out while others are waiting for solutions from all of the credit card brands to become available before starting, or a single universal solution (which may or may not be developed). Either approach is fine and no retailer is required to upgrade at all.
 
The most dangerous thing you can do is ignore EMV and revert to credit card swipes, which we saw many retailers do during the busy holiday shopping season. The problem is swiping chip-enabled cards shifts liability for fraudulent transactions on counterfeit cards squarely to you. If current EMV transaction speeds are impeding your business, work with your technology partners to develop a strategy that works for you.
 
Ian Goldman, President and CEO of Celerant Technology, is an expert software engineer with 25 years of experience developing advanced management solutions that offer integrated omnichannel capabilities for progressive retailers.