Mar 23, 2015

Is This the End of the Swipe?


By Adam Billings

A Great Read – If You Geek-Out over Financial Transactions

There is a global payment movement happening in the financial industry that will have a profound effect on the way retailers process payments and accept liability. Nowhere will this have more impact than in the four walls of our restaurants and bars. The new standard is called EMV (originally named after EuroPay, MasterCard and Visa), and has been successfully integrated into the European model for years now. Each credit card has a smart chip imbedded in the card that allows for a more secure and convenient transaction. So why is the transition from swipe to chip such a big deal, and what does it mean long term?

It’s no coincidence that mobile payments are all the rage right now with Google, Apple and MCX, just to name a few. Disruptive change is usually the result of new or better technology and government policy. That perfect storm is about to take shape in October of this year when the Payment Networks’ Liability Shift takes effect. This will make payment processors responsible for fraud losses from transactions without EMV-capable terminals. Processors are likely to forward that responsibility to the operators at some point, and that is when we will see real change.

Rather than harp on the how and why of EMV integration (so boring), I also wanted to explain what happens after restaurants adopt the new terminals. It’s no surprise the financial industry is slow to transform, so we will likely be swiping cards for many years to come. That doesn’t mean early adopters won’t be eager to test their new chip cards. This means big change for the front line of your restaurants.

Training and educating your staff will be essential, especially if a new POS system is part of the transformation process. The new standard will require chip and pin, or chip and signature, depending on your security level. This means new process and procedures for your staff, and a new learning experience for your customers. Minimizing the disruption to your business will be the biggest challenge.


For quick-serve restaurants, this could mean the integration of wireless terminals for mobile payments. While this represents a huge step in the mobile payment revolution, it also offers new opportunity for the process to slow and create customer aggravations.

At full-service restaurants, this will mean the use of mobile payment devices that are brought to the table. These devices will need Wi-Fi or another mobile network to connect. This scenario of a server, a customer and a new handheld device could prove the most challenging.

A big challenge that has yet to be addressed is the scenario of card not present, which many times occurs during to-go orders. In this case, there is no chip to scan, pin to confirm or signature to verify. The operator is reliant upon the information being communicated over the phone, and that is certainly not secure. I suppose conventional wisdom tells us to solve the biggest problems first, so this will have to wait a few more years.

Early adopters of EMV will take solace in knowing that the new process has been proven to decrease fraud significantly. It will be the operator’s challenge to implement this without disrupting the guest experience. The swipe may have been around for the past 40 years, but technology changes and so should your restaurants.