In the ever-prognosticating world of payments, there's at least one technology transition that's a sure thing — the EMV migration planned for October 2015.
A handful of payments power players have already begun to prepare for the migration, and now Square plans to join the fray. The San Francisco-based company announced Wednesday that later this year it will begin offering EMV card readers to its customers.
Short for Europay, MasterCard, and Visa, EMV is a payments standard in which tiny computer chips are embedded into credit cards to create a unique impression that's difficult to counterfeit and relatively impervious to the hacks of fraudsters, especially when compared to the magnetic stripe that's still commonly used in the US.
A major difference between how chip cards and mag-strip cards are used is the manner in which they communicate with the reader. While Mag-stripe cards are swiped through the card reader, EMV cards are inserted into the reader and left in place for the duration of the transaction, while the reader and the embedded chip in the card talk back and forth.
Judging by images released by Square, the EMV reader will maintain the look and size of its signiture magnetic stripe reader. Specific pricing figures have yet to be announced, but Square said its new reader will be cheaper (and smaller and faster) than its competitors.
That being said, the Square EMV reader is unlikely to come equipped with a keypad, which according to James Wester, research director for IDC Financial Insights, is neccessary for the acceptance of Chip-and-PIN.
Wester said Chip-and-PIN cards are the safest EMV cards as they require not only the chip-card be inserted but also that users enter a PIN. And to be PCI-compliant, the keypad and the reader device must be separate, so the smartphone or tablet cannot be used to register the PIN. Instead, Square's device will likely only accept Chip-and-Signature cards, Wester said.
"Those will be the standard cards issued in the US for some time (a decision made by most card issuers) so it won’t really affect much in the way of card acceptance. No one will be turned away from a merchant if they're using a US-issued card," he said. "However, and this is important, Chip-and-Signature cards are not the most secure cards. They don't prevent stolen cards from being used. That's a much more common occurrence than cloned cards being used. And that's another reason why Square's message touting security is a bit curious to me since the option its reader will support isn't the most secure option."
Still, Square founder and CEO Jack Dorsey touted the benefits of the company's impending card reader in a prepared statement:
"There are more and more ways to pay, and with options like bitcoin and contactless, customers expect to pay however they want; cashiers should never have to say 'We don't accept that'. Square started by empowering anybody to accept credit cards and enabling customers to pay with their name. Our EMV readers are the next step towards ensuring sellers make every sale."