Restaurants, Cautious About EMV, Start Doing Their Homework

It's no secret that restaurants are going to be slow to adopt EMV relative to other retail categories, but in the past two months more dining establishments have begun to focus on  the business-side issues and changes to customer interaction brought on by chip cards.

Unlike most other retail settings, where the biggest consumer-facing change will be to ask the shopper to dip the card rather than swipe it, restaurants must entirely rethink how they handle card payments. Because diners may have to choose a tip amount at the time they present their card, it may no longer be possible for wait staff to carry the patron's card away from the table.

"Restaurants are concerned about how EMV will affect operations," said Tim Sloane, director of emerging technologies advisory services for Boston-based Mercator Advisory Group. "Some have operations in Europe [where EMV is standard] and are trying to learn from that, relative to the U.S. market. But this is a huge change, with customer interaction being the key concern."

Terminal makers have been providing restaurants with the option of handheld EMV-enabled card readers to address concerns about tipping and ease consumers' fears of having their card data stolen when the card is out of their sight.

The tipping process can even vary from issuer to issuer, said Andy Sirmon, marketing manager at NCR.

"In the chip-and-signature world, tipping can be much like it is today, by taking an EMV card, dipping it, then adding the tip, and doing an adjustment after the fact," Sirmon said. But some issuers will require a PIN, and "in a chip-and-PIN world, a tip would have to be added to the total before authorization and before dipping the EMV card," he said.

To reach that happy medium for tipping, restaurant owners are contemplating whether a customer would be comfortable choosing from a set of predetermined tip amounts at the time of payment. Some consumers may be used to this process from food-ordering apps such as GrubHub's Seamless, but others may not appreciate being guided to a specific tip amount.

"[Restaurants] are not sure if this will frustrate the customer and most don't like to force a tip starting at 15% to 20%," Mercator's Sloane said. "If they standardize it by starting at 10%, there is a fear that most diners would think that is OK and choose the lower tip."

Tipping is not a major concern in most European countries because the tips tend to be much lower, in the $2 range, and just added to a bill, Sloane said. Mercator's clients include many large restaurant operators that are addressing the EMV conversion at this time.

The time-honored practice of running up a tab has to change as well.

"On bar tabs with EMV, whether it is signature or PIN, you have to have the final bill total for EMV cardholder verification," NCR's Sirmon said.

Still, a bartender should be able to tally items and dip the EMV card after a final order. However, many restaurants with busy bars do not want to take the risk that the tab will not be closed because a group of people moves to a dining room and forgets to pay, Sirmon added.

With mag-stripe that was never an issue because that party's credit card would have been swiped at the beginning of the ordering process. A best practice for a restaurant converting to EMV would be to pre-authorize $50 on a card upfront and refund any unused amount, Sirmon said.

NCR added tableside mobile payment options for restaurants two years ago with its Aloha point of sale device, which also accepts online orders. This product has been the key POS offering in NCR's plan to get restaurants on board quickly in accepting online and mobile payments in addition to EMV transactions.

In another signal that movement toward EMV acceptance at restaurants will pick up pace, Heartland Payment Systems last month completed EMV certification for Digital Dining's iPad point of sale systems. The move was designed to quickly certify restaurants and promote chip-card acceptance.

Yet many restaurants, especially small and midsized ones, are waiting to gauge chargeback costs and observe how larger operations adjust to EMV, Sirmon said. After Oct. 1, any entity unable to handle EMV transactions faces a shift in fraud liability, but some merchants have questioned whether the investment in EMV will cost more than they would pay in fraud losses.

"They want to know how the liability shift will impact them in real dollars and cents, and then call their processor and get the numbers on chargebacks," Sirmon said. "We have seen instances where that number is very low, and the cost of implementing EMV may not be worth it at this time."

In addition, restaurants want to get feedback on how much time EMV would add to table-side service, because table-turnover speed is a major factor on the business ledger.

"With mag-stripe cards, a waiter can take a couple of cards ... and swipe them in parallel," Sirmon said. "With the EMV transaction process, those cards have to be dipped one at a time, and it takes more seconds with each transaction vs. magstripe."

Some operators may earmark EMV as a 2016 project, which provides time for staff education on chip cards and assessments on mobile payment alternatives, Sirmon said.

Restaurant franchise operators will likely get guidance from corporate decision makers, but may also independently determine what is best for their particular restaurants and customers, he added.