With the October fraud liability shift deadline now days away, 78 percent of small and medium-sized retailers still have not adopted EMV compliant systems, and of those, 23 percent said it is "unnecessary."
Additionally, 62 percent of U.S. consumers are still without an EMV chip card, according to Software Advice's research released this month.
Besides the high number saying EMV is unnecessary—perhaps explained by low average transaction values—34 percent said they don't have time to research and implement EMV; 33 percent said it's too expensive to adopt; and 10 percent don't even know about EMV despite substantial levels of EMV publicity.
|Software Advice: SMB confidence in ability to meet EMV deadline|
"Small retail merchants have a lot to do in any given day," Justin Guinn, market research associate at Software Advice, told FierceRetailIT. "This is particularly evident for the 64 percent of small-business retailers who don't have a point-of-sale system in place and are operating only off of manual methods, such as paper receipts and spreadsheets."
That reasoning might help shed some light as to why only 22 percent of neighborhood retailers are currently EMV ready. "It's as if the process of looking into an EMV reader or compatible POS system takes a backseat to their daily operational tasks," he said.
"In our new study, we found this to be the case with 34 percent of SMB (small and medium-sized business) retailers saying just that. Not far behind, 33 percent of the retailers we sampled say that 'cost' is the primary component for not being EMV ready. Considering the razor-thin margins that so many business owners are operating on, this too, helps put things in perspective," Guinn said.
These are understandable justifications for not yet being EMV compliant, but as of Oct. 1, they will start seeing what the avoidance of EMV might mean to their businesses, he said. "Retailers are going to need to make the time and spend the money to become EMV compliant, or they open themselves up to a huge amount of potential risk. The cost of adopting a new system could be like a drop in the bucket next to what they could be held liable for if their shoppers are hit by credit card fraud originating from their business."
In October, the liability for credit card fraud will shift from the card issuers to either the retailer victimized by the fraud, or the financial institution, depending upon which one is least prepared for the EMV transition. In the case of many of the retailers surveyed by Software Advice, the retailers will assume this liability.
Although many large retail chains are on top of the EMV transition, some aren't and they could be impacted by the fraud liability shift. "Whereas SMB retailers may only have one location, and only one to three terminals to update, big brands like Target and Home Depot have thousands of stores with 10 or more payment terminals at each. These numerous payment terminals will costs big brands tons of capital to make compliant, but at the same time, each of these numerous payment terminals pose serious fraudulent risks if they're not made compliant," Guinn said.
Target was ready for EMV a month in advance and, at least in some stores, so is Walmart. "Aside from Home Depot, few big brands but Target understand the scrutiny, significant financial loss and customer attrition caused by fraudulent charges and a loss of consumer trust," he said.
If big-brand retailers are slow to transition to EMV compliance, criminals may exploit them with fraudulent, stolen cards. If this happens and competitors are touting their EMV compliance, a retailer could suffer "a devastating blow to consumer perceptions. Aside from the fraudulent paybacks, the customer attrition could be quite damaging. Thus, although the initial spend for big-brand retailers to obtain compliance is great, more so are the potential negative outcomes of not being compliant," Guinn said.
In reference to the retailers who deem EMV "unnecessary," Guinn said they shouldn't be thinking this way if they want to fully protect their business. "EMV compliance is very necessary. Small-business retailers juggle a lot of details, and becoming EMV compliant needs to be one of them. Merchants who don't take on this mindset should reconsider ASAP, because every day that passes after Oct. 1, they could be opening themselves up to potential damages that could be crippling."
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