Small Businesses Cut Credit Cards Off at the Knees, Turning to Mobile Payments Instead

August 24, 2016         By: Steven Anderson

This is likely the last thing the credit card companies ever wanted to hear, but the move to Europay / Mastercard / Visa (EMV) standards is actively backfiring at the small business level.

Small retailers, as it turns out, are increasingly turning away from EMV and turning instead to mobile payments systems to handle customer payments.

The word came from the CAN Capital Small Business Health Index, which revealed that just over one in three small businesses, about 34 percent, currently took mobile payments options like Apple Pay. That’s up in a big way, as in April 2015, that number was down around 13 percent.

That’s interesting enough, but it gets a little unnerving the farther along we go. Just 27 percent of respondents noted that their point of sale systems were actually EMV-compatible, and this despite a big shift in liability to those small businesses who aren’t keeping up.

The liability shift doesn’t seem to matter much to those businesses, or doesn’t matter sufficiently to matter against the costs of upgrading; 70 percent of businesses don’t plan to make the shift in even the next 12 months.

CAN Capital CEO Daniel DeMeo called the developments “concerning,” and noted that small businesses should be “working with payment processors…to upgrade their payment systems both to protect themselves and to better serve their customers.”

If small businesses are staying out of EMV altogether, it might have an adverse effect both for them and for the broader industry.

Right now, most who stepped up to EMV were larger retailers. If only larger retailers are in, it may be that even they will start to wonder why they’re bothering with EMV.

It’s not immediately clear just how liable businesses are if they don’t accept credit cards at all but rather mobile payments, but if it serves as a way around EMV liability, it might be an unexpected workaround.

Still, that that many businesses are willing to risk the liability shift is a problem, and a point that payment processors need to beat, quickly.

With high expense and difficulty in learning the new systems a big part of why businesses are staying out, payment processors need to make it easier and cheaper to make the move to EMV. Without small business, that’s a large part of the market that’s on the sidelines.