WASHINGTON -- The costs to small businesses of the transition to EMV credit-card and debit-card technology are “staggering”—averaging more than half of annual profits for convenience stores—yet the switch still represents a “missed opportunity” to further reduce fraud, according to congressional testimony by a National Association of Convenience Stores board member.
Testifying before the U.S. House of Representatives Committee on Small Business for NACS, Jared Scheeler, managing director of The Hub Convenience Stores Inc., indicated that it has cost his chain of four North Dakota c-stores $134,500 to date to install point-of-sale (POS) and pump card readers that accept Europay MasterCard and Visa (EMV) chip transactions. (Watch the full committee hearing below.)
The average transition cost is more than $26,000 per store, compared with an average profit of $47,000 per year, bringing the total cost to approximately $3.9 billion for the more than 152,000 convenience stores nationwide.
“As a small business, the transition to EMV has been a costly and burdensome undertaking. It does not appear that the card companies took into consideration the realities of operating a small business when they came up with their transition plans,” said Scheeler. “In addition to the substantial time and money involved, the card companies have erected considerable obstacles that restrict my ability to reduce payment card fraud at my stores.”
Also, a gift shop owner told the committee that making the change to chip-and-signature credit cards has been “overwhelming” for many small businesses and that owners are disappointed that without PINs they are being pressured to make an expensive investment without receiving the full level of security that could be provided.
“The EMV transition is overwhelming and expensive for an independent, small retailer,” Keith Lipert, owner of The Keith Lipert Gallery, a single-location, three-employee store in Washington, said. “Small retailers are entirely at the mercy and whims of the big players. We have no say and no way to use the marketplace to make our objections heard and our concerns valued.”
“EMV is all new to me, and banks and the networks are not contacting small businesses to help the transition in any way,” Lipert said. “No one from my bank, processor or existing supplier even contacted me about the need to add a new EMV device, let alone a deadline by which to do so.”
Lipert testified on behalf of the National Retail Federation.
Lipert said a key concern is that the EMV cards being issued by banks in the United States are chip-and-signature cards rather than the chip-and-PIN cards used in virtually all other countries where EMV cards are used. He cited Federal Reserve statistics showing that using a secure, secret personal identification number to approve transactions is seven times more secure than an easily forged and often-illegible signature.
“We find it extremely frustrating that the card industry expects retailers and other businesses to upgrade when it will not allow the U.S. to adopt the most secure form of this technology--chips with PINs,” he said.
Lipert said small businesses in particular are seeing “significant delays” in obtaining chip card readers or getting them certified once they are installed.
“Small business updates are simply not a priority for the hardware manufacturers, the software providers or the certification entities,” he said. “I asked my payment technology rep when I could expect new devices if I ordered it this month and was told the equipment is on backorder.”
With each chip card terminal costing as much as $2,000 when installation, software and other expenses are included, Lipert said the price is “extremely high.” And without PIN, “it makes little sense in any serious customer protection or basic return-on-investment analysis.”
While the chips make the cards more difficult to counterfeit, Lipert said they do nothing to protect lost or stolen cards, while a PIN alone could prevent all three types of fraud.
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