EMV Hurdles Hurt U.S. Sales for Major Terminal Makers
As EMV faces rollout hurdles in the U.S., two major terminal makers, reporting adoption delays from smaller merchants, are paying the price.
U.S.-based terminal maker VeriFone partly blamed an “EMV bottleneck” in the U.S. for its 3 percent year-over-year revenue drop in its third quarter of 2016. Net income decreased 15 percent, according to the company’s latest earning report. (Political problems in Turkey and economic woes in Latin America also contributed significantly to the declines.)
“At our last earnings call, we had anticipated that the North America EMV upgrade cycle would start to pick up again and that distributer inventory would sell through at a faster pace in Q4 than what we saw in Q3,” CEO Paul Galant told analysts and investors on a Sept. 1 conference call, according to a transcript from Seeking Alpha. “That is not turning out to be the case. We now see a significant slowdown in small- and medium-business terminal upgrades. And many larger merchants in the U.S. are pushing out orders as they continue to work to integrate software, certify the EMV, pilot their solutions and finally roll out and turn on chip card acceptance. VeriFone has been working diligently to help our clients accelerate their roll outs, but it’s taking longer than anyone expected.”
Additionally, France-based Ingenico on Sept. 6 warned of a sales slowdown because of similar problems. It’s full-year organic revenue will increase 7 percent in 2016 instead of 10 percent, the company said. “In recent weeks, Ingenico Group has been facing a sudden and significant decline in its U.S. market, which accounts for approximately 10 percent of group revenues,” Ingenico said.
In part, those slowdowns also stem from a relaxation in EMV liability rules. Visa earlier this year said it would wait until April 2018 to hold merchants liable for card transactions of less than $25, which Ingenico said takes the pressure off of smaller merchants who might be inclined to buy new, EMV-compliant terminals earlier.
With the general U.S. EMV liability shift last October, most major merchants in the country are equipped to handle the anti-fraud chip card standard, according to analysts, vendors and reports. The latest figures from Visa, released in late August, show that issuers have distributed some 335 million EMV cards in the U.S., a 173 percent increase from a year earlier. Nearly 30 percent of all U.S. merchant locations accept EMV cards. Visa recorded more than 500 million Visa chip card transactions in July, 16 percent more than the same month last year. Counterfeit fraud with EMV-accepting merchants dropped 38 percent in April compared with the same month the previous year.
But much works remains. “By the end of 2016, we believe there will still be more than 5 million terminals that will need to be upgraded to EMV in the United States. This is above our prior projections, primarily due to slower adoption in the SMB and hospitality verticals,” Galant said during the conference call. “We thought that with SMB, given the concerns about chargebacks that those folks [have] were going to move much more rapidly and would continue throughout the year. Obviously, that’s not happened.”
The bad news from terminal makers comes only weeks after EMVCo., which maintains the chip-card standards, said it would for the first time, provide “formal certification for contactless mobile payment devices.”