Insert or Swipe? Chip Cards Vex Retailers on Eve of Black Friday

Black Friday: Inside the Changing Retail Landscape
  • Fearing longer lines, most merchants delay using new readers
  • Macy's accepts new technology, while Nordstrom holds off

The first Black Friday in the U.S. since the mass introduction of credit and debit cards with chips promises to baffle shoppers who find some stores using the new technology and others only accepting swipes.

QuickTake Credit Card Security

While the recent switch to the model of payment long used in Europe is meant to cut down on fraud, it also threatens to lengthen checkout times by as much as 30 seconds per customer. On the day after Thanksgiving, when thousands of people are looking for deals, it could create logjams. Some merchants fear customers will get so frustrated, they’ll leave the store.

Half of U.S. retailers will have installed the equipment necessary to accept chip cards by year-end, but only 20 percent will have turned on the functionality, according to Mercator Advisory Group. That’s created a hodgepodge system that’s bound to sow confusion at the mall during the most critical sales period for retail companies.

“None of them wanted to risk messing anything up for the holiday season,” said Alex Johnson, a senior analyst at Mercator, a payments and banking industry advisory firm.

Mixed Bag

Target Corp., Wal-Mart Stores Inc., Macy’s Inc. and Home Depot Inc. all said they’ve trained employees to make sure customers insert their cards and keep them in the terminal for the duration of a transaction. But at other stores, including most Cinnabon units, Nordstrom Inc., Panda Express restaurants, Panera Bread Co. and Whole Foods Market Inc., shoppers will still need to swipe.

“I can just imagine a consumer on Black Friday, they go to Target first and they try to swipe the card, and they say, ‘No, you got to insert it,”’ Johnson said. “They go into another store, try to dip the card, they say, ‘We haven’t turned it on yet.’ There’s going to be a lot of inconsistency that’s going to slow down the whole process.”

Many retailers delayed the introduction because of the experiences of users like Elise DeHart, a 27-year-old operations manager in Portland, Oregon. She tried her new debit card with a chip at a Target store in Portland, Oregon, last month, and ended up frustrated.

“It took five times to get it to run,” she said. “It takes longer than sliding it. They are not very convenient.”

European Import

Used in Europe since the 1990s, credit and debit cards with embedded chips are finally available in the U.S. after years of delays, and retailers are spending about $30 billion to install the compatible equipment, according to the National Retail Federation. The technology makes it more difficult for criminals to clone stolen cards compared with those with only magnetic stripes. That could help limit the fallout from retail hacks, such as the massive breach at Target in 2013.

Yet the Oct. 1 deadline that Visa Inc., MasterCard Inc. and other credit-card networks set for most merchants was ill-timed, just ahead of the holiday season, which accounts for 19 percent of retailers’ $3.2 trillion in annual sales, according to the NRF. The Food Marketing Institute, which represents supermarkets and pharmacies, even tried to get it postponed.

‘Forcing Anarchy’

For smaller merchants that switched recently, so close to the start of the hectic shopping season, it could mean potential chaos. Black Friday is typically one of the busiest shopping days of the year.

“We are forcing anarchy,” John Drechny, senior director of payment services at Wal-Mart, said at the Money20/20 conference in October. The world’s biggest retailer began accepting chip cards in 2014 and has had time to adjust, he said.

Cinnabon plans to install terminals capable of reading chips in more than 80 of its 250 mall-based bakeries by early next year, according to President Joe Guith. The main goal is to upgrade old point-of-sale equipment to new Revel gear and add new features, he said. Risks of fraud at the chain, whose average check is $6, is minimal, so Cinnabon has been in no rush to implement the new technology during the holidays, he said.

“This is our peak period, and making sure we can move transactions quickly enough is critical,” Guith said.

‘Just Slower’

At Panera, which sells baked goods, sandwiches and salads, 20 additional seconds would reduce the speed of the checkout process by 20 percent, said Blaine Hurst, chief transformation and growth officer. 

“We might have been able to push it out during the holiday season, but we want to test this out and not disrupt the holiday season,” Hurst said. “There’s a higher probability that someone will leave that card, and it’s just slower.”

To speed up checkout times, department-store chain Macy’s is adding salespeople equipped with hand-held devices to check out customers from anywhere in the store, a strategy known as line busting.

But even with months of preparation by merchants, checkout time for people using chip cards could be a third longer than for those swiping the old magnetic stripe, said Richard Crone, chief executive officer of Crone Consulting LLC, whose associates monitored lines around the country.

“I don’t see any retailer being ready,” Crone said. “They’ll be taken to the court of social media.”

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