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MAG Sponsor Spotlight: Small Merchants Are Not To Be Forgotten (MAG Quarterly- Volume Three, Issue Four)

By Robert O. Carr, Chairman and CEO, Heartland Payment Systems

December 8, 2015

Many of the large merchants that MAG represents have already made the shift to accepting chip-enabled credit cards well in advance of this past October’s Europay, MasterCard, and Visa (EMV) liability shift deadline. For those who have, I know you would agree that implementing EMV was both a major effort and distraction for your respective organization. However, many small merchants have yet to start down the EMV journey.

One challenge these small merchants confront is that they do not have the resources like a large retailer or restaurant chain. In many cases the individuals running these businesses are the chief executive officer, chief financial officer and all other c-level positions rolled into one. Since they may not have a complete understanding of their payment ecosystem to begin with, they can easily be taken advantage of.

According to the U.S. Small Business Administration, there are more than 23 million small to mid-size businesses in the U.S. These merchants account for nearly 54 percent of total U.S. sales. However, approximately 69 percent of these companies doubt their ability to upgrade to EMV compliance by this fall of 2015, as reported in a recent study by Gartner’s Software Advice division, a place where merchants can review a POS system before purchase. Of the small to mid-size businesses that were even aware of EMV, many of them have not implemented this technology.

  • 34 percent say they don’t have the time to research and implement it.
  • 33 percent say it is too expensive to adopt.
  • 23 percent believe it is unnecessary.

Why are small merchants lagging in EMV adoption?

I believe many small merchants are confused when it comes to both EMV and Payment Card Industry (PCI) compliance. Much of their confusion is intentionally caused by some dishonest point-of-sale (POS) vendors, and others in the payments industry, who take advantage of small merchants and lines their pockets with added profits. This is a sad but honest fact that needs to change.

Throughout my career, I have consistently advocated for fair, transparent and ethical credit, debit and prepaid card processing for small merchants. But deceptive pricing practices continue. Some in the payments industry are promoting unfair and illegal competition, which costs even the smallest of merchants hundreds, or sometimes even thousands, of their hard-earned dollars each year without their awareness.

Such tactics can include falsely inflating pass-through interchange or adding “junk” PCI compliance fees, PCI non-compliance fees or superfluous EMV transaction fees. Industry-wide, the cost of deceptive interchange practices and other fees run into hundreds of millions of dollars and have caused great harm to the reputation of the entire payments industry.

However, small merchants are finally taking notice of this and standing up for their rights. Several merchants initiated class-action lawsuits have been filed against those who choose to be dishonest. We applaud these efforts and support lifting the veil of deceitful practices that have tarnished our great payments industry for decades. 

What can you do?

Be an advocate for small merchants. Although EMV is important, and will mitigate risk associated with counterfeit and lost/stolen cards, they need to be aware it does not protect them from the ever-evolving sophistication of today’s cybercriminal. Industry trade associations like MAG can play a vital role in this education.

The National Restaurant Association, for example, has joined forces with Heartland and other key payment industry stakeholders to spearhead the PCI Council Small Merchant Task Force. The goal of this group is to not to focus on PCI compliance, but more on educating the small merchant on how technologies like encryption and tokenization will render card data useless and mitigate risk associated with a data breach.  

Please join me today and help support small merchants, who are the backbone of our vibrant U.S. economy. Thank you.