It is now more than two years since Chip and PIN was launched. The initiative has been a massive success for the banks, with take-up levels among retailers high and cardholder-present fraud significantly reduced.
The journey hasn’t been as easy for retailers, though. The cost and inconvenience of implementing Chip and PIN has only been part of the story. Some have faced ongoing problems with equipment failing and higher maintenance costs as a result.
There are now more than 900,000 tills with Chip and PIN in the UK. Banking industry association Apacs says that 98 per cent of all shop tills in the UK have been upgraded to accept Chip and PIN payments.
Anecdotal evidence from retailers suggests that many have not been happy with the performance of their pin entry devices, however. Figures from Vista Retail Support back this claim. It has maintenance contracts with many high street names and keeps records of all the faults it sees, so it has a good idea of the failure rates of Chip and PIN devices across the retail sector.
Vista head of sales and marketing Derek Hutchinson says the reality is a far cry from service providers’ forecasts. “The service providers thought the failure rates would be around 15 per cent over a year, bearing in mind that other EPoS equipment has about a 5 to 10 per cent failure rate. We have found that among our clients the failure rate is in fact running at around 25 per cent, and that’s bearing in mind that proper care and attention has been paid in the installation and use of the systems we maintain,” he explains.
Hamish Mackness, partner sales manager at payment processing provider Logic Group, backs this figure up, saying he too has heard anecdotal evidence of 25 per cent failure rates.
Hutchinson doesn’t think the industry was able to reliably estimate the initial failure rates – the fact that the equipment was handled by customers made for an unknown variable. He adds: “We were seeing 50 per cent failure rates. However, we know of one retailer who suffered a 140 per cent failure rate, having put in 1,000 devices and having to replace 1,400 in a year.”
In the early days, Ingenico came in for particular criticism, according to Hutchinson. However, he says it is not fair to single out this individual manufacturer because many types of devices have had problems.
Another hardware manufacturer, VeriFone, believes the experience it gained in the early days of Chip and PIN is now helping it design better products. EMEA head of marketing Debbie Mitchell admits: “We have all been on a huge learning curve. Things have changed in that period. Our second generation products are based on consumer experience.”
It’s also fair to say that the failure rate is not simply down to technical problems, but the way the equipment has been installed and looked after by the store staff.
Mackness explains: “Traditionally we have provided the software that glues things together, though, with the launch of our Smart TPS service, we now have one year’s experience of maintaining terminals ourselves.”
He says the numbers of returns the company has seen overall have been higher than expected, but the number returned because of hardware failures has been lower. He adds: “Many of those we get back have been dropped rather than failed.” Of the Logic Group-maintained terminals that have been returned, an estimated 30 per cent could have been fixed with a simple reboot. The software can fail to diagnose the problem and this is something the company says it is working on.
However, Hutchinson says that retailers and their support providers can work together to reduce these failure rates. While Vista is only allowed to do certain repairs on Chip and PIN devices in order for them to retain their bank compliance, it has been able to get some working again by replacing faulty cables and simply cleaning them. It also works with its retail customers on programmes they can implement, such as better staff training. He adds: “One simple thing you can do is make sure that the device is mounted in a good solid cradle. It really reduces the risk of the device being damaged. Cleaning the device regularly also helps.”
Housekeeping is key
Mitchell says that although VeriFone has not witnessed the overall failure rates described by others, accidental damage is a problem. She adds: “We only see a small part of that proportion [25 per cent]. Some of it is accidental damage. We have seen all sorts of things, like people cutting cables without thinking about how they would plug the device in again.”
She agrees that simple housekeeping can make a difference. “As part of the delivery we give an installation guide. It is quite simple to show how it should be kept clean. With our own installations we go through an education programme with our customers,” she says.
Mackness points out that another reason why retailers have replaced terminals is that some opted to take pin entry devices that have an integrated printer, which creates another possible point of failure. Once the Chip and PIN system is integrated with the EPoS system, then any printing is done by the main EPoS printer, which he says is more reliable.
Another issue retailers and their service partners have had to contend with is shortages of replacement devices and now certain devices being discontinued.
Vista, for example, tends to keep supplies of the equipment its customers have deployed, because most customers have a service level agreement promising a fix within either four or eight working hours. Yet, as a maintainer, there is only so much that a company such as Vista can do when a device stops working, so both retailers and support firms are reliant on manufacturers to get the devices fixed.
However, Hutchinson says that it can take more than 20 days to get a faulty device turned around by the manufacturer and this creates further cost and risk. Again, some manufacturers are better than others, and have addressed the problem by providing response times of seven to 10 working days.
Not enough to go around
Shortages of devices has also been an issue. Mackness says: “Where we have gone outside of our forecast rates, we have struggled to get terminals when we need them.”
Hutchinson agrees. “The knock-on effect of the enormous failure rates has not been so much to do with whether we could afford to hold the stock, but more that the stock was not available to us,” he explains. However, he says that this is now much less of a problem.
Mitchell says one major issue affecting all Chip and PIN devices and their design is the evolving security standards. Pin entry devices are now approved by the PCI Security Standards Council and must meet certain guidelines. “Our strategy is to have products that can be upgraded easily but sometimes we are required to change the software and the hardware to meet security standards,” she says. “We will continue to support non-compliant products through their life cycle.”
Problems with failures should start to reduce as more retailers move onto second generation devices. Some larger retailers will have experiences of these new devices already because Hutchinson says that they have been more vocal about their dissatisfaction with the early models, and so have negotiated highly discounted replacements or upgrades.
“When we spot problems and trends, we can let the manufacturer know first or go to the manufacturer with our customer. We have been quite successful at getting upgrades this way,” he says.
Asked whether VeriFone had financially assisted retailers who wanted to upgrade to more reliable equipment, Mitchell is coy, simply saying: “We are always looking at a long-term relationship with them.”
In the next few years, even retailers that have not suffered higher than expected failure rates will begin to think about upgrading their Chip and PIN systems as they reach the end of their life. Mackness says that retailers are looking for extra functionality from their systems and are showing interest in combined Chip and PIN and contactless payment devices, as well as mobile payment terminals.
With downtime at the tills being a major concern for retailers, the industry needs to learn from its experiences of Chip and PIN to make sure that future systems are more robust.