November 24, 2016
As November draws to a close, 2016 is officially almost over. This also marks just over a year since the EMV liability shift for US merchants occurred in October 2015. So how are US merchants doing when it comes to chip-and-pin adoption?
Wait, what is EMV again?
EMV, which stands for EuroPay, MasterCard, Visa, the three companies that created it, is a technical standard for credit cards. EMV cards replace the magnetic stripe with a microchip which provides unique data protection when inserted into a chip reader. EMV may also be referred to as ‘chip-and-pin’ because many require a PIN code to be entered in order to access the card data. However, there are also ‘chip-and-signature’ EMV cards.
How is the US transition to EMV going?
US news has for months been peppered with stories of confused consumers frustrated with the transition. Consumers chiefly complain that it is difficult to discern whether they need to swipe or insert their chip cards into the terminals at various merchants. So when can they stop guessing and start inserting their chip cards 100% of the time? While it is difficult to obtain a single, reliable figure given the size of the US market, most estimates suggest that between 22-37% of US merchants are currently able to accept chip-enabled credit and debit cards. Visa estimates that 84% of merchants who have not upgraded are working on it. On the consumer side, the figures are much higher, with MasterCard estimating that 80% of its consumer cards now contain chips. And Visa says that 55% of its credit cards and 43% of debit cards have been upgraded. This may seem like a low percentage, but it amounts to 388 million cards circulating in the US alone.
Merchants that have made the shift are seeing benefits. According to MasterCard, merchants who have adopted the technology have seen a 39% reduction in fraud in January 2016 compared to January 2015. Visa EMV merchants reported a 43% decrease in fraud. Meanwhile, merchants who have failed to make the shift have also begun to feel the effects. Fast food chain Wendy’s, for example, is facing a lawsuit that alleges it failed to protect its customers from a data breach due to its failure to keep its payments processing technology up to date. There are many reasons why the US adoption of EMV has been slow. A survey from January 2016 showed that the biggest hurdles were payment processor readiness, gateway readiness, and technical staff resource availability. Merchants may also be concerned that changes in payments processing technology could be costly or disrupt their regular operations.
So, what’s next?
It looks like things will progress slowly towards full adoption over the next year or so, but this was to be expected. Some estimate that 90% of US merchants will adopt EMV by the end of 2017, but others have suggested it may take much longer. Despite the issues with the adoption in the US, EMV continues to grow worldwide, with more than 4.7 billion cards issued globally.
Meanwhile, credit card companies have been taking steps to make the transition more appealing to merchants. Visa recently clarified that merchants can route EMV debit through the network of their choice. MasterCard recently unveiled a simpler EMV certification process and Amex has placed limitations on merchant chargebacks. And all four major card companies have launched programs to speed up EMV transactions themselves. If you have questions about the process of becoming EMV compliant, one of our experts will be happy to speak to you! You can contact us here or at 1-855-458-2372.