Moving the immovable: 3 ways to migrate merchant ATMs to EMV
by Daryl Cornell, Triton Systems
A problem without a solution.
The coming train wreck.
No way out.
These are but a few of the descriptions being bandied about by ISOs increasingly frustrated by the unwillingness of small merchants to upgrade POS devices and ATMs to EMV.
Exhibits A and B in this case are the most recent press releases from both Ingenico and Verifone blaming recent earnings misses on plunging EMV-ready hardware sales to merchants.
With sales below forecast and, presumably, bloated hardware inventories, the two companies must be scratching their heads as to why, nearly a year after POS liability shift, an estimated half of all U.S. merchants have yet to upgrade their POS devices to EMV.
Both device-makers blamed small merchants for delaying their adoption of EMV technology in POS devices. Ingenico went further, blaming the card brands for a "relaxation" in fraud chargeback rules meant to spur EMV adoption by these same merchants.
With ATM liability shifts scheduled for this October (MasterCard) and October 2017 (Visa, Amex and others), the focus (and ISO frustration) now shifts to ATMs.
The same small merchants who are delaying on adoption of EMV at the POS are also delaying the upgrade or replacement of their mag-stripe ATMs.
Will we see mass small merchant adoption of EMV at the ATM later this year? Not likely.
Will the card brands "relax" the fraud chargeback rules as we saw with POS? Right now, no one is saying.
What are ISOs with large portfolios of merchant-owned, non-EMV ATM terminals to do?
Here are a few options:
1) Upgrade kit
This is the cheapest option for merchants and ISOs. Depending on the manufacturer, even 15- to 20-year-old ATMs are still supported and can be upgraded easily to EMV with the purchase of an upgrade kit at a cost of about $500.
At that price, ISOs might be able to persuade merchants that the cost of an upgrade far outweighs the potential cost of fraud chargebacks. At better-performing sites, ISOs might even be willing to absorb the cost of an upgrade kit in exchange for an extended contract.
Depending on the site and the merchant, a new ATM might be the best solution. However, the high cost of a new ATM has thus far been a barrier to widespread merchant upgrade.
Trading in older, non-EMV hardware to the manufacturer accomplishes a couple of things: Firstly, the net cost of the new ATM is drastically reduced by credit given on the trade; Secondly, the older ATM stays out of the landfill.
Reduced upgrade cost plus environmental responsibility can be a persuasive combination in convincing merchants to upgrade.
Refurbished, EMV-ready ATMs are an increasingly popular option with merchants. The popularity of refurbished ATMs has exploded, driven by merchants who want a fresh machine without the new-ATM sticker shock.
Depending on configurations, a refurbished ATM, partially offset by the trade-in of a used ATM, can reduce a merchant's cost to nearly that of an upgrade kit.
Refurbished ATMs as an option for merchant upgrade to EMV can be a powerful tool in the hands of ISOs.
With most small merchants still taking a "wait and see" approach to ATM EMV upgrade, ISOs need a variety of ways to proactively address the issue.
By providing low-cost solutions to their merchant customers, ISOs might be able to move the needle in cases where the "just buy a new ATM" approach has failed thus far.
The other alternative could well be costly court battles between ISOs and merchants over who pays six-figure liability shift claims, as we saw in Canada.