by: Daryl Cornell –
Winning merchant sites is HARD. Most of these folks are savvy, ruthless negotiators who will squeeze all of the profitability out of an ATM site contract even if you are “lucky enough” to win a site. At most locations, IADs aren’t generating enough profit to upgrade these terminals to EMV. Merchants, meanwhile, continue to play “wait and see” to evaluate whether the chargeback risk will be worth the ATM upgrade cost. The result is nearly 200,000 merchant owned ATMs which will not be EMV capable by the October Visa ATM liability shift deadline. So how does this movie end? While there are a number of possibilities, nearly all of them are opportunities for IADs who prepare now.
A little background from our Northern neighbors may give us a hint of what’s to come. The Canadian EMV regulatory deadline of December 2012 was far more stringent than a liability shift. As we are now seeing here in the U.S., Canadian merchants simply ignored the deadline or didn’t believe that it would be enforced. On January 1 of 2013, non-EMV ATMs were simply turned off by the Canadian processors. Despite the hard deadline, nearly 10% of all Canadian retail ATMs, most merchant-owned, went dark. A majority of these merchants woke up a few months into 2013 and went ahead and upgraded or replaced their ATMs. The result was a strong hardware sales year for manufacturers and a windfall for Canadian IADs who were prepared to aggressively poach these merchant sites in 2013.
Fast forward to 2017, a couple hundred miles South and you have a softer, but potentially more severe EMV upgrade deadline. MasterCard, Visa and the other networks claim to be deadly serious about offloading an estimated $2 billion in annual magnetic stripe fraud at ATMs. We are not talking about a case of beer or a tank of gas. This is cold, hard cash, withdrawn $200-300 at a time. By the time the chargebacks make their way back to the merchant 60-90 days later, the damage could easily be in the tens of thousands of dollars for each non-EMV terminal. So, amidst what looks like widespread carnage, how can U.S. IADs make hay post ATM liability shift?
Prioritize Sites. With nearly 200,000 merchant-owned ATM sites ripe for the poaching in the wake of the October ATM liability shift, prioritizing the highest traffic sites is the first step. Obviously, developing a rapport with the owner can help in being ready when the chargebacks start flowing. Gathering information about who currently services the site, what kind of ATM hardware is installed and how satisfied the owner is with their current contract are all useful pieces of information. A list of high-value targets is critical before launching your stealth attacks on merchant sites later this year.
Develop a Strategy. One size definitely does not fit all when it comes to retail ATM EMV strategies. An upgrade kit, supported by manufacturers for ATMs up to 15 years old, is your cheapest solution at around $500. A close second is a certified pre-owned ATM (refurb) which can be purchased for as little as $1,200. Trading in a used ATM on the purchase of a new ATM (or refurb) can keep your ATM acquisition costs well below $1,600. Advising merchants about their ATM upgrade options is real value add on the part of IADs. The IAD’s willingness to potentially make an ATM upgrade investment on behalf of the merchant must be carefully balanced against the type of contract and revenue share the merchant will agree to. Developing a strategy for each of your high priority sites will definitely provide a leg up over the incumbent whose advice is likely, “just buy a new ATM.”
Keep Your Ear to the Ground. The final key to success in scooping up merchant contracts is understanding when the merchant will begin feeling serious chargeback pain. Given a current October liability shift deadline of October and adding 60 days until the fraud chargebacks begin flowing, you should begin hearing merchant weeping sometime after Thanksgiving. Letting the merchant know that you are ready and able to remedy the situation when it happens is a large part of the battle for merchant site contracts.
The merchant logjam in resistance to EMV upgrade will not last forever. With a little bit of preparation and planning, IADs may find winning merchant contracts between now and the first of next year to be like shooting fish in a barrel.
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