By the end of this year, it’s estimated that 70 percent of all credit cards and 40 percent of all debit cards (about 1.1 billion in total) worldwide will be EMV capable. This payment system, also known as chip and pin, adds dynamic data to the transaction stream that renders replay of payment transactions impossible. And since every card contains its own microprocessor chip, EMV (which stands for Europay, MasterCard, and Visa) cards are nearly impossible to counterfeit. There’s no need for the card to leave the customer’s sight, and there’s no swiping. The credit card number isn’t exposed on a screen. Though not entirely fail-safe, the technology is a global standard and makes transactions hundreds of times more secure. In Europe, which has had EMV for years, reports indicate that card fraud has fallen as much as 60 percent over the last decade, whereas here in the United States, it’s increased about 50 percent over that same time period.
Come October, there will be an added incentive for hotels to upgrade to EMV systems, as that is when credit card companies are set to enforce what’s called the “liability shift.” This means that any merchant that doesn’t support EMV—either by not installing EMV-compliant POS (point-of-sale) devices or by running cards through the old-fashioned way, without the benefit of the chip and pin—assumes liability for fraudulent transactions. Having the onus of fraud responsibility fall to the least EMV-compliant party means that hotels will need to invest in EMV-compatible infrastructure to protect themselves. But with the average cost of one EMV-compliant POS terminal running about $500, it’s hard to gauge how much money to sink into a new credit processing technology that many hotel operators won’t need right away. “I expect it could take years before we get everyone using chip and pin cards because of the significant hard costs involved for banks to reissue cards,” says Warren Dehan, president, Northwind/Maestro PMS. “It’s going to be up to hotels to drive the financial institutions to issue cards. As long as the hotel has the ability to process a chip and pin card, the liability is removed.”
Updates to the current card system cannot come soon enough. According to the Verizon 2014 Data Breach Investigations Report, the accommodations sector, which includes hotels and restaurants, is one of the biggest targets for POS breaches. “The Target and Home Depot breaches tell us that hotels may not be any more susceptible than anyone else, but they also tell us that the situation is bad news for everybody,” says Maryam Cope, VP of government affairs at AH&LA. “Merchants and banks haven’t always been on the same page, but now the dialog is moving forward. As an industry, we have to keep reevaluating ourselves. PCI [payment card industry]compliance is a tall order, hoteliers need to check their compliance on a regular basis.”
The challenge for hotels will be in developing a PCI-compliant system that includes both POS devices and the proper network infrastructure and training for people who process payments. “PCI is all encompassing,” says Dehan. “It’s not just about cards but about the security of all data and managing the network. Let’s say a hotel takes reservations via fax. That piece of paper has the customer’s information on it. What happens to an emailed reservation? There needs to be secure protocol with everything. Handling all the nuances is a part of a hotel’s PCI obligation.”
All the more reason for why merchants and card issuers should continue to get in sync on this issue. “Hotels should invest in chip and pin readers because there’s no doubt the cards are coming, plus the chip and pin readers available are sophisticated and provide versatility,” Dehan adds. “Merchants should check with their banks directly or whoever handles their PMS to make sure readers are compatible with bank software and that all their vendors are ready and can handle the upgrade.”
Dave Hogan, executive director of major accounts at Heartland Payment Systems, believes investing upfront in technology that’s capable of handling the future of payments will ultimately help keep costs down. Currently, this means smartphone and tap-and-go technologies utilizing NFC (near field communication) payment systems, since they can enhance the guest experience by speeding along check-in, as well as restaurant and amenity purchasing. “We anticipate a tipping point with EMV by the middle of 2015,” Hogan says. “There may be as many as 500 million cards out there by then, and NFC is going to complement this surge.” And since there will be a lot of competition among vendors to meet this increasing demand, hotels should have lots of bargaining power.