Can you believe EMV has already been around in the U.S. for a year? Last October 1st marked the liability shift for EMV and changed the way credit and debit card payment transactions occur. Now that EMV has hit its one-year milestone, experts are taking a look at how EMV adoption has performed and what shortfalls have occurred during the last twelve months.
Slow Chip Card Distribution
Throughout the past year, EMV integration started as a slow and painful process for many key payment players, but has now picked up in terms of adoption. The distribution of chip cards showed to be a slow-moving process, as many consumers still lacked an updated card by December of 2015 – well past the liability shift. Since millions of chip cards had to be produced, not all consumers received their chip cards by the liability shift, causing a significant disruption for the world of payments.
EMV Certification Delays
The certification and deployment of EMV technology was another major issue involving EMV integration during the first year. Many merchants who met the liability shift and had EMV-capable equipment were not able to process chip cards. The problem? Most terminals lacked the appropriate certification needed to accept EMV technology by the liability shift. Required EMV certifications for EMV-capable products from processors and acquirers caused substantial delays, leading to integration and certification bottlenecks that slowed down the deployment of EMV-capable solutions.
“Activation and certification is one significant issue,” said Jared Drieling, Strawhecker business intelligence manager, when referring to the delays many experience waiting for a payments entity to certify the POS terminal’s EMV application as compliant. “There’s a large base of merchants out there essentially waiting in a queue.” Availability of EMV POS terminals can also be an issue in some cases.
EMV Challenges for Merchants
The transformation to EMV technology also caused challenges for merchants. In fact, most merchants did not meet the liability shift, even though they were aware of the potential risks of becoming fully responsible in an instance of counterfeit fraud. Most merchants claimed cost was a main reason why they did not upgrade in time to EMV-capable solutions. Merchants who transition to EMV not only have to upgrade their POS systems to support EMV, but also have to replace their card readers and hardware used to assist with the transaction, making it costly for any business. Merchants also claimed lack of time researching and implementing EMV was another reason they did not meet the EMV deadline.
Chip Card Complaints
There was also the complaint of how long it took for a chip card to be processed at the terminal. Since chip cards must remain inserted in the terminal to complete the transaction, many felt that EMV transactions took longer to complete compared to the standard swiping of a card at a terminal. In reality, the difference is just a few seconds. Not to mention, many consumers did not know how to use their chip cards properly the first few months, which caused longer lines in stores and frustrated consumers.
Online Fraud Spike
With EMV now increasing card-present security, fraudsters are instead targeting online fraud instead. Rurik Bradbury of TransUnion refers to this change in tactic as the “ripple effect” and that online fraud will significantly increase because of the new chip cards. In fact, several other countries that implemented EMV technology years ago experienced the same ripple effect.
“That’s the seismic aftershock effect of that October (2015) rule change. The same happened in countries preceding the U.S. with EMV. With the EMV adoption, what has happened in other countries – Australia, Canada, the U.K. – there has been a big rise in online fraud. By making it more difficult to commit fraud in-store with EMV, the shift to online has accelerated,” said Bradbury.
The Future for EMV
Although there were glitches and setbacks throughout the first year for EMV, the transition from magnetic-strip cards to chip cards has continued to grow, as more merchants begin to adopt EMV technology and more consumers receive an EMV chip card. EMV adoption is expected to reach 90% by 2017 and there has been more engagement from merchants during 2016 than 2015.
“We are seeing more engagement now from merchants [since] the first of the year,” said J. Craig Shearman, vice president for government affairs and public relations for the National Retail Federation. “They understand a little more about what the liability shift is and understand more about what the process is.”
A survey conducted by Creditcards.com also found that presently, over 70 percent of consumers have a chip card. This is a huge growth considering in September of last year, only 14 percent of consumers possessed a chip card.
The first year for EMV has proven to be an interesting one. Delays and setbacks caused frustration for many involved with the adoption of EMV while increased pressure for merchants to become compliant proved to be a major concern. Chip cards equally showed to cause some confusion. However, EMV technology has proven to help increase security for card-present transactions, yet experts now need look into providing solutions to prevent fraudsters from committing crime online.
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