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Change is Coming to a POS Terminal Near You

Merchants Will be the Most Impacted by EMV

Of all the inhabitants of the payments ecosystem, merchants will be the most affected by the shift to EMV. As those that accept the bulk of payment transactions, have the most direct interaction with consumers, and will have liability slide to them if their terminals are not chip-capable and certified, it’s critical that merchants embrace the move to EMV.

According to research from Aite Group, a good percentage of large retailers and a significant percentage of midsize retailers will be chip-enabled by October 2015 when liability shifts to the least secure party.1 Not all reports on EMV readiness are as optimistic. My experience in talking first hand with merchants in the US indicates that there will be a decent number of large and midsize retailers that won’t be ready even based on their best efforts.  In fact, the Wall Street Journal reported that the Food Marketing Institute sent a letter to Visa, MasterCard, American Express and Discover Financial Services asking the companies to move the deadline for implementation into 2016.2 The same research from Aite shows that more than half of smaller merchants surveyed are either unaware of the migration to chip-cards, are undecided, or are unwilling to convert. (This part is not as surprising).

Why Some Merchants Choose to Pass on EMV

There are several reasons some merchants are not motivated to upgrade to chip-enabled POS terminals.

  1. POS Lifecycle – The average age of a merchant POS system is 3.3 years and the average replacement cycle is 5.2 years.1 Merchants caught in the middle of the cycle this October are likely to wait until the end of the lifecycle to upgrade.

  2. Lack of Awareness – About a third of smaller merchants surveyed still don’t know that chip-cards are coming. Some that are aware don’t know who to ask for help making the change to chip-card POS terminals. Only 16 percent1 of respondents in Aite’s survey intend to formally train front-end employees on the EMV migration. That figure includes large retailers that are positioned to bear the brunt of customer frustration over the new experience.

  3. Complexity – Merchants with integrated, customized POS platforms face a complex and timely implementation process that may prevent them from upgrading in time.

EMV readiness isn’t the only thing large retailers should care about when it comes to payments. While this technology will mitigate the risk of liability shift, it won’t train their staff, modify the software to fit their operations or maintain itself going forward.

Retailers should look beyond the October 1 deadline to consider how an upgraded platform can not only safeguard secure payments, but also how it can be leveraged to improve the payment experience for customers. While nearly 75 percent of large retailers surveyed are aware of emergent payment forms like ApplePay, very few intend offer it.1 EMV-compliant POS terminals include support for near-field-communications (NFC) payment methods like Apple insetPay, and retailers willing to use the EMV migration as an opportunity to expand their payment options will position themselves to outpace the competition when consumer demand rises for new, more convenient ways to pay.

Helping Reluctant Merchants Make the Change

All players in the payments ecosystem can help merchants adopt the coming change by raising awareness about EMV benefits. This includes an open dialogue between merchants and vendors related to the cost of upgrading payments infrastructure, and reminding merchants of how high-profile retailer security breaches can impact the bottom line.

If all the players in the payments ecosystem take part, the shift to EMV can be a seismic movement in the right direction rather than a catastrophic disruption to consumer confidence and behavior.

This is the second post in a new series on EMV. Up next: Timelines and Impacts.

1. Peterson, T., Fishman, J. EMVelocity: Outlook for POS Reterminalization and Mobile Payments. Aite Group, January 2015. 


Director of Solution Consulting

Bob Koscheski is director of solution consulting for the Merchant Retail sector at ACI Worldwide. He has a wealth of experience building software products to serve the needs of financial retailers and financial services organizations, and has been a principal owner in two startup software companies offering enterprise applications for electronic payments and banking. Prior to ACI, Bob was chief operating officer at LeRoux Pitts and Associates, a retail payments software company.