ST. PETERSBURG, Fla.—When Quick Chip and M/Chip arrive at POS terminals to speed up EMV transactions, will the new process alleviate merchant issues at the checkout line only to shift headaches to issuers and debit cardholders?
One analyst asserts that is just the scenario that could play out, saying Visa’s Quick Chip and MasterCard’s M/Chip processes may require merchants to place temporary authorizations on cards—for dollar amounts that could be significantly higher than the final transaction—that if not cleared quickly enough could lead to overdrafts and transaction denials.
Visa and MasterCard have stated that the new process, which has yet to be publicly finalized, will speed up chip-card checkouts. Merchants have complained about the longer time it takes for a chip transaction at the checkout line. The new system would not require cardholders to leave the plastic in the terminal throughout the transaction, as is required by EMV now.
Process Not Defined
Art Harper, director of solutions consulting for payment card and plastics solutions for PSCU, said he has concerns as Visa and MasterCard have yet to share how the new EMV process will actually work.
“One of the concepts being discussed is that you don’t get the full authorization while the cardholder is standing in front of you,” said Harper, who added that the two major payments networks said the new process will allow cardholders to remove their plastic before the transaction is completed and possibly leave the store before the final authorization takes place. “So maybe I am not getting approval or denial for the transaction, almost like granting a temporary authorization. Like the gas pump environment—swipe your card, a temporary authorization is placed on the card for a certain amount, you pump your gas and then the station clears the temporary amount when the authorization for the final transaction comes through.”
Art Harper, PSCU
But Harper said that if indeed this is the approach chosen by Visa and MasterCard, will it simply shift the chip-card burden to issuers and cardholders?
“What if the transaction is denied, or if the merchant is slow in clearing the temporary amount. When people used their debit card at the gas pump when gas prices were extremely high, these things led to overdrafts and other problems,” said Harper.
Depending on the process that is finally adopted, Harper questioned whether Quick Chip and M/Chip will really speed the POS transaction, or just eliminate a perception that dipping a chip takes a lot longer.
Harper said studies have shown the dip takes one to three seconds longer than the swipe, but emphasized that all M/Chip and Quick Chip may do, if a temporary authorization is not employed, is eliminate the perception that the dip takes a lot longer. He contends that perception exists because consumers leave the card in the terminal instead of just putting their plastic back in their wallet after swiping.
“Unless the payments networks go to a temporary authorization, the process for the EMV transaction remains the same—the transaction leaves the POS terminal and routes to wherever it needs to go to get approval, and then comes back,” said Harper.
Harper noted that only assumptions can be made now as Quick Chip and M/Chip have yet to be seen “in action. Everyone is working on how this will take place at merchants.”
Good Or Bad?
Harper said Visa and MasterCard have yet to share any rollout date. Harper guessed that the new EMV process may appear in July.
So is Quick Chip and M/Chip really needed?
“The jury is still out, for the reason that we don’t truly know what the impact of this new process will be,” said Harper. “Are we just shifting the challenges of EMV transactions, or perception of chip transaction taking a lot longer, to cardholders and issuers if we move to a type of ‘gas pump’ environment? Until we know the impact of this—on merchants, issuers and cardholders—I don’t know if we can say this is a good or bad thing.”