Chip cards and new wireless payment methods are coming soon. Will you be ready?
ALPHABET SOUP #1:
EMV – CARD OF THE FUTURE
standard for the rest of the world. EMV cards contain an integrated circuit chip embedded in the card, which encrypts or scrambles the cardholder data, like the
account number, making them almost impossible to duplicate or forge. The United States has stubbornly hung on to conventional mag-stripe cards, and has been paying the price, a very high price. Due to the superior anti-fraud protection of EMV cards, most international card-fraud criminals have focused their unwanted attention on the United States, in part explaining the recent, major security breaches at the likes of Target and Home Depot.
A consortium of major credit card companies has been trying for years to accomplish the transition to EMV cards in the United States. Both here and abroad, the banks adopted a fairly heavy-handed carrot and stick strategy, with the emphasis being on the stick. Beginning October 1, 2015, U.S. merchants who do not accept EMV cards will be responsible for any card fraud, not the banks. This is referred to as the “liability shift.” The carrot is that merchants who accept EMV cards will be exempted from many PCI audit requirements. The liability shift occurred almost 10 years ago in the European Union.
Accepting EMV cards can be an expensive process. The cards contain a pad with a series of gold contacts, which are read by inserting the card in a specially designed reader, completely different than a mag-stripe reader. So, you’ve guessed it, you will need new credit card readers to be able to accept EMV cards. However, as we shall see, it’s not all bad news. These new readers will also support novel wireless payment methods, which open the door to exciting new possibilities for promotions and special offers to keep your customers involved with your wash.
ALPHABET SOUP #2:
CVM – TRUST BUT VERIFY
EMV cards in the rest of the world are also called “Chip and Pin” cards. This is due to the fact that a PIN or Personal Id Number must be entered on a pin-pad to verify the identity of the cardholder, just like you currently do with an ATM card. This PIN entry is known as the CVM, or Cardholder Verification Method. Historically in the United States, with conventional mag-stripe cards, the CVM consisted of a signature, initially on the paper credit card slip and, more recently, on a touch-screen at the checkout. While PINs are pretty much universally required for EMV card usage outside of the United States, Visa and MasterCard have indicated that they are not mandatingPIN entry for all EMV cards in this country. Depending on the card issuer, a signature may still be the CVM method for some EMV cards.
EMV cards have many options for CVM, including online and offline PIN, and signature. For car wash owners the “No CVM” option is of vital interest. For low-ticket, low-risk purchases, or unattended purchases, the card issuer has the option of setting a “low dollar threshold” below which no CVM method is required. This means that EMV card terminals used only for low dollar transactions are not required to include an expensive encrypted keypad, keeping cost down. The exact level of the low dollar threshold is still being worked out. Industry contacts we have spoken to feel that the threshold will ultimately be $75. Fast food chains are eager to have a higher threshold, so their transactions are all No CVM, speeding throughput. For wash owners, it seems certain that they will be able to operate under the low-dollar threshold, and hence No CVM and a simpler, cheaper terminal.
ALPHABET SOUP #3:
NFC – THINGS GET INTERESTING
As EMV cards have developed, changes were introduced to make them more us
friendly. With the “contact” EMV card, which transmits its information through the gold contact pad, the card must be inserted into the reader and remain there for some time. In initial EMV trials in the United States this proved difficult for cardholders to adjust to. Consumers were habitually used to doing a quick swipe of a mag-stripe card. In part to address this, and also to just simplify transactions, the wireless or “contactless” EMV card was developed. This card just needs to be waved or tapped on the card reader and it is read wirelessly. So now we have a third form of card reader, along with the mag-stripe reader, or MSR, and EMV Contact reader, we have contactless or wireless EMV.
Once terminal manufacturers were required to incorporate short-range radio communications into card readers, this opened up the possibility of entirely new forms of payment involving two-way wireless communication with smartphones or tablets running payment apps. This resulted in NFC, for Near Field Communication. One of the first of these NFC implementations was Google Wallet, running on Android devices. Customers can make payments directly from their smartphone. Unless you’ve been living under a rock, you are probably aware of the recent launch of the iPhone 6 and arguably its most important feature, Apple Pay. This impressive rollout, with simultaneous announcements by major banks and credit card issuers, also provides the ability to make payments from your new iPhone or iP
NFC is probably the most exciting of all these payment methods for wash owners. Imagine accepting payments from a customer’s smartphone, and at the same time offering the option for them to provide their cell number in order to obtain receipts or get special offers. If they haven’t been back to the wash for a while, you might text them a coupon which they could use at the wash. The possibilities for promotions, specials, and customer loyalty are endless. The days of tokens, coupons, private label or local fleet cards, and RFID tags seem numbered.
Well, first, let’s be clear, mag stripes are not going away any time soon. Almost all of the EMV cards being issued in the United States will still have mag stripes, so you definitely will not have to replace your mag-stripe readers by October 1, 2015. The petroleum industry has obtained an exemption, and will not have a liability shift until October 1, 2017. Mag-stripe cards may never go away, since many gift card and national fleet card issuers have no plans to transition to EMV cards. However, after October of next year, if somebody buys one or more washes with a stolen or forged mag-stripe credit card, and you don’t accept EMV, you will definitely not get your money back from the bank. So, you might have to absorb some card fraud.
However, with all the big retailers rolling out both EMV and NFC enabled terminals, at some point in the not too distant future, just accepting mag-stripe cards will seem as obsolete as just accepting quarters. With a competitive business like a car wash you have to strive to constantly maintain customer loyalty. Accepting EMV and contactless EMV is nice, but the real future is probably being able to offer the advantages and novelty of NFC payments. As the younger generation becomes more and more smartphone centric, offering NFC payment presents your wash as state-of-the-art and forward looking and you will attract a younger customer base, who hopefully will stay with you over time. The possibilities for phone-based text and e-mail promotions are wide open and will be exploited by innovative wash owners in the near future.
The ideal credit card terminal would support three different payment types, mag stripe, contact and contactless EMV, and NFC. Several manufacturers have recently introduced such terminals, intended for unattended operation in applications like vending machines, parking lots, and, you’ve guessed it, car washes. Equipment vendors in the car wash industry are just beginning to offer these new terminals as part of their payment systems. We are working on a wireless system that allows the wash owner to mix and match conventional mag-stripe swipers with advanced 3-way readers, and upgrade from the former to the latter as demand grows.
If you are contemplating a credit card upgrade, or doing new construction, it seems prudent to go with a “future proof” card solution, one that will provide 3-way readers that can accept not just mag stripe, but also EMV and NFC. Otherwise, at some point in the near future, you may discover that you need to replace the mag-stripe swipers you recently installed, just to stay even with the competition. The payments landscape is changing rapidly. Forward-looking wash owners can take advantage of this change to increase their competitive advantage.
Bill Dolson is Manager at POS Tech Solutions LLC, a manufacturer of upgrade and retrofit payment card systems for the car wash industry. http://www.postechsolutions.com, email@example.com