It has been almost two years since the EMV liability shift in the United States. While a lot of business owners have adopted EMV solutions, many are still on the fence on whether to update their payment systems as they continue learning about the value of EMV and the consequences of failing to comply. Some small businesses have been reluctant to comply due to the amount of resources needed to change over their point-of-sale systems. Other have adopted EMV but have been unable to fully jump in due to months-long certification delays.
In order to adopt EMV, merchants need to first determine if they will be developing their own solution or purchasing one from a value-added reseller (VAR), an independent software vendor (ISV), or POS software developer. They must also determine if they need a fully integrated or semi-integrated solution. With the sizable investment in time and resources it takes for a merchant to update their POS technology, semi-integrated solutions are becoming increasingly popular. Not only do they offer practical benefits to merchants but they also minimize some of the headaches that are associated with the shift. They simplify the EMV process, expedite in-store experiences, offer ease of ownership, and reduce Payment Card Industry data-security standard (PCI) compliance requirements.
The Difference Between Fully Integrated and Semi-Integrated
Before deciding on semi-integrated payments, it is important to understand how they differ from fully integrated solutions. With fully integrated payment solutions, the payment application is combined with the POS solution. The fully integrated payment software handles every single part of the transaction, including processing the payments, barcode reading, tendering payments, and managing inventory. They incorporate other business applications with the payment processing such as customer relationship management (CRM) and accounting. The system includes all of the payment data, which helps save merchants’ money and time, increases sales, and creates finance transparency.
The big difference between fully integrated and semi-integrated solutions is how exactly the payment information is handled. Fully integrated solutions have their PIN pad or signature pad connected to the POS terminal, which then communicates directly with the merchant’s network and the gateway or acquirer. This is riskier for the merchant, who stores sensitive payment information because it requires them to need ongoing EMV re-certification for any modifications done to their POS application, whether that be a software update or a change to the hardware itself. This results in additional expenses and delays in activation.
Semi-integrated solutions completely remedy these headaches. By contrast, cardholder data bypasses the POS terminal and is directly transmitted from the card reader to the processor or gateway. A lot of times this is done with encryption and tokenization for added layers of security. The payment information uses separate software that is not directly connected to the POS application, a huge step-up from their fully integrated counterparts.
The Benefits of Semi-Integrated Solutions
Even though semi-integrated solutions have existed for a while, they were originally created to enable card acceptance for older legacy equipment. The older legacy equipment was unable to communicate with gateways or payment processors. Now that there has been a shift to EMV, the advantages of semi-integrated payments are better highlighted:
• Faster EMV Certification: Semi-integrated payment solutions come certificated and equipped with a range of supported hardware terminal options. The software has all of the required payment functions and features implemented within it, tested, and certified for connectivity to a gateway or processor. It has been certified for EMV end-to-end functionality with credit card brands. The semi-integrated solution eliminates PC-based POS systems therefore reducing the total number of certifications required. Merchants can save valuable time, energy, and money because the EMV certification is already incorporated.
• Easy Implementation: Semi-integrated solutions are plug-and play, which means an ISV customizes the system to a merchant’s specifications. Due to the plug-and-play aspect, implementing a semi-integrated solution is extremely quick, depending on the complexity of the enterprise application and features. Semi-integrated solutions can be used with mobile point-of-sale (mPOS) as well. Once certified to process contactless payments and integrated with NFC-capable teminals/ readers, mobile systems will be able to handle contactless payments using supported payment-processing platforms.
• Increase Security and Reduced PCI Scope: Semi-integrated solutions can be examined by an accredited qualified security assessor (QSA) to ensure that the cardholder data is handled within a secure PCI PIN transaction security environment, or within a secure, pre-certified PCI payment application data-security standard (PA-DSS) setting so that the data cannot get out beyond those boundaries. This means that the entire solution is out of scope for PCI compliance, eliminating the merchant’s costly, bi-annual, obligation to certify their system. Also, it is important to note, that some semi-integrated solutions enable the POS system to hold very limited amounts of cardholder data, such as card numbers, for loyalty programs. These are not entirely out of scope for PCI, but greatly reduce that scope, which is still a huge benefit.
• Easy Ownership: Business owners using semi-integrated solutions have easy access to simple software updates that do not affect their payment functionality and do not require re-certifying or reconfiguring their system. These types of software updates can include fixes to bugs or new added features. Any hardware changes or changes that deal with transaction flow, for example Visa’s Quick Chip, to speed up EMV transactions, will mandate re-certification. However, the ISV or software developer will manage those processes.
• Decreased Time to Market: Semi-integrated solutions decrease the time to market because they are already certified for transaction processing. This increases their speed to market because they are EMV and PCI PA-DSS compliant. Merchants will ultimately end up saving time and can invest more energy into other aspects of their business.
Benefits for ISVs and VARs
A semi-integrated approach to EMV for an ISV or VAR means that they are able to avoid going through the full certification process on their own. This saves the partner money, time, and allows for a quick deployment to market. The merchant will benefit from the semi-integrated approach because it means that it works with their existing software. By setting up an EMV capable terminal, they will then be ready to process EMV transactions because their ISV or VAR has already done the hard part for them. Their chargebacks due to card-present fraud will decrease and the customers will benefit by knowing that a business takes their security seriously.
ISVs and VARs have a big opportunity to differentiate themselves and their customers with enhancing their POS software and devices. This provides value throughout the different verticals they service through point-of-sale systems. Besides basic payment functionality built into the software, additional features include NFC payment acceptance and the potential for incorporating loyalty and reward programs for their merchants to allow for repeat business and strengthen customer bases. This will strengthen the relationship between merchants and ISVs and VARs because it positions them as trusted advisers. This will also keep them in-tune with technological advancements in the payments industry, showing their merchants they are ahead of the curve.
The Preferred Option For Merchants
Given these benefits, it is not surprising why many merchants have chosen the semi-integrated approach when upgrading their payment solutions. It provides an easier path for merchants to streamline the process while strengthening their security. They save time and money, as well as set up their payment infrastructure for what may come next in the payments industry.
Semi-integrated solutions can seem expensive because of the volume-based licenses and maintenance fees that potentially come with it, however, the added costs are offset by the number of benefits and upfront returns on investment. Merchants that switch over to semi-integrated payment systems from fully integrated solutions, save on both development time and avoid re-certification fees and ongoing PCI-DSS compliance costs. It is no small wonder why small and medium-sized merchants that had not yet adopted EMV, are quickly choosing semi-integrated to satiate their payment processing needs.