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This week we’re back with another Q&A session with FoodTec’s Daniel Flaherty, VP of Business Development, to talk about EMV chip card technology, what it means for restaurateurs and why choice of payment processor is now more important than ever.

Prior to EMV – and when we say EMV we mean credit or debit cards that are chip enabled – shopping for the lowest price for payment processing used to be very free and easy for restaurants. EMV changed that. EMV requires a little bit more structure and continuity between a variety of the different pieces.

So, Dan, why is having choice of payment processor that big of a deal and what are the big concerns – besides just purely what the rates are – with a payment processor choice and how it relates to purchasing a POS?
Dan: Before the advent of EMV, FoodTec’s approach was “We don’t mind who you use, it’s your decision, and/or if you want a recommendation, we would be happy to give one.” We stayed out of the middle. By doing this it created trust because we don’t have a financial interest in the payment processor and don’t have an additional hand in their back pocket. But more importantly, for the client, it gives them the flexibility that if their rates change over time or something occurs, they are able to switch from one payment processor to another easily. But now EMV has made this much more difficult because of the way that these chip cards actually process. It is a unique combination of the front-end processor, the back-backend processor, the hardware device and the POS application. If any of those four pieces gets altered or changed or removed, it’s an entire new certification.

So how does that impact what you can offer your customers?
Dan: It limits how many processors we can easily integrate because each certification is a very expensive proposition. So, if a customer came to us and said, ”We want to process our payments with Processor A.” Before we start work on it, we already know that it’s going to be out of pocket – certification fees are six-digit costs, before any development begins. Very few brands are in a financial position where that makes sense for them. What some banks are doing is offering to fund the fee in exchange for a length term contract, (3+ years at a minimum). With an exclusive contract, businesses are effectively locked-in to the partnership – and hardware. Then, fast forward four years from now, if the business does want to change processors, they will more than likely have to redeploy every piece of hardware in every store. If they owned multiple stores, with each store costing more than $1,000+ to outfit with new equipment they more than likely will not switch.

Okay, so let’s say a small business approaches you and has, for example, 10 stores and are looking for the lowest deal, but what if the lowest deal is someone that requires us to go out and get a new certification?
Dan: Well, again, we would of course have to look at it strategically. More than likely, at the end of the day, it’s not going to lower the deal when you factor in the cost. And that’s why we have the processors we currently are aligned with because even though we don’t have a financial relationship with any of them, they understand they can be replaced. So they remain much more competitive and they remain invested in ensuring the success and delivering the bottom line because there’s no exclusivity that guarantees that they’re there tomorrow.

So what you are saying is that EMV has made it harder for clients to have the flexibility to choose the payment processor they want but it’s still possible to find a competitive rate as the better point of sale systems are integrated with a pool of the best candidates?
Dan: Correct. What’s happening now is a lot of POS applications are aligning themselves with one provider. More often it is because they get a piece of the action – they’re included in residuals from the ongoing processing and the exclusivity, so they have a vested interest and being in that sole exclusive partnership. The detrimental part is the client is forced into a hardware decision on the EMV terminal. The best solution for restaurateurs is to find a POS company that actually can offer a variety of integrations with a variety of payment processors. While this is tougher to do, at the end of the day, it will save the restaurant more money because they have the choice of payment processor fees and also most likely the point of sale company will not be in the middle and taking part of the transaction fee. And this is what we offer here at FoodTec; we want what’s best for the customers and give them the flexibility to be able to bounce between a couple, should they choose that they are better fit for different types of processors.

So, for restaurants considering going down the route of an all-in-one solution they essentially pay more for the convenience – similar to an extra fee, which in the long-term isn’t a very effective strategy?
Dan: Right, it’s very attractive on the acquisition costs and even some point of sale companies will subsidize up front so they can offer very, very low, introductory prices to the point of sale, but require a contract because they know they’ll make it up over the term of the contract and the processing with the obvious hope of the customer staying after that contract, but their rates stay where they were – more often than not, they don’t ever go down. So, they’re making a long-term play to create that lock-in, get the customer familiar, with the overall goal of making it less attractive and flexible to switch.

Lastly, how many payment processors are we currently integrating with?
Dan: Currently three and by end of year we’re looking to add a fourth and maybe even a fifth option.

If you are currently looking to integrate EMV technology or want to know more, get in touch with us today and find out more about our solutions and how we can help you grow your business and meet your customer service needs.