EMV: the cost of confusion

Oct. 1, 2016 marks the one-year anniversary since the chip-card, or EMV, deadline set by the major card brands went into effect. Prior to the deadline, the grocery industry spent more than five years and hundreds of millions of dollars to become EMV enabled. Despite the proactive efforts to meet the card networks’ arbitrary deadline, many grocers are still struggling to become EMV enabled. Over the past year, the Food Marketing Institute (FMI) has heard countless stories from members whose EMV deployment was pushed back time and again by their overwhelmed vendors. While grocers had the hardware in stores and awaited software certification, they faced an unprecedented spike in chargebacks. Grocers reported receiving tens of thousands of dollars a week in chargebacks; and some of the hardest hit had an astounding $1 million week in chargebacks. In early September, Digital Transactions put a real number on the pain being inflicted by the card brands onto Main Street retailers. They reported that American merchants will shoulder an additional $5.8 billion in chargebacks as a result of the card brand’s EMV liability shift.

The card brands have made EMV migration in the United States unnecessarily challenging for retailers. As grocers continue to try and migrate to EMV they are discovering problematic debit screens that are confusing and frustrating for customers, while inhibiting merchants’ ability to choose which network to route a debit transaction through. Federal law requires debit networks to compete for both merchant and bank routing business. Many merchants cannot find a way to eliminate the screens and still comply with Visa’s arbitrary and capricious merchant operating rules. These screens are blocking merchants’ legal rights, and the card brands are manipulating the market to their advantage.

{mosads}Needless to say, 2016 has been a challenging year in payments for the grocery industry. Our members have taken countless steps to prevent fraudulent credit and debit card transactions, while working tirelessly to complete the maze of EMV certification and compliance. This has come at a real cost to an industry that over the past few years has also taken on the burden of greater government regulations, reporting requirements, increased labor and health care costs all while operating on an average 1.5% profit margin.

It is times like these that our legislators and regulators should look for ways to provide relief to our industry, not increase the difficulty of doing business by removing competition that has successfully driven down costs. Unfortunately, House Financial Service’s Chairman Jeb Hensarling’s bill H.R. 5983 or the “Choice” Act would do exactly that. Section 335 of his bill, would repeal the successful and pro-competitive 2010 debit reforms that have benefited so many. 

The debit reforms, brought transparency and security, and have ensured competition from a variety of routing networks in the marketplace, where previously there was none. Addressing the broken debit payments system led to an increase in innovation and competition, helping keep consumer costs low.

H.R. 5983 ignores the calls from Main Street grocers and employers from every district in the country, and dismantles a law that requires banking giants to compete with other networks for routing business. Instead of trying to repeal a law that requires competition in an open market, Congress should take a close look at implementation of EMV in the United States and how the current approach extinguishes innovation and quashes competition.

Jennifer Hatcher is senior vice president of government and public affairs at FMI.