Ah, the US and the struggle of EMV adoption! The journey to bring the States in line with Europe, which has made the most of the technology for the past ten years, has been quite a roller-coaster. However, now the momentum appears to be working in its favour as MasterCard says “Americans are quickly embracing EMV chip cards,” but are there any obstacles that could impede this momentum?
The complex road to EMV adoption
In the year running up to the October 1st deadline, optimism was the name of the game as 70% of credit cards were predicted to have been raised to the EMV standard. However, the closer the deadline got, the more many had to re-evaluate their positions. With nine months to go, a report revealed that 55% of retailer respondents still had some way to go before they would meet the deadline requirements.
The day after the deadline passed, the Payments Security Task Force, whose members include American Express, Bank of America, Visa and MasterCard and account for roughly 50% of US payment card volume, said that 30% of their U.S. consumer credit and debit cards contain EMV chips as of June 30.
Initial complexity, cost and education
More recently, the CEO of Arroweye Solutions explained that the merchants are still in the process of migrating.
“At the same time it’s added two things to the card issuing model. It’s added complexity and cost. Complexity wise there’s a lot more upfront work to start a programme on EMV than there used to be and a lot more administrative models. Cost-wise it’s five to 10x to get cards in the marketplace so it’s really modifying the whole P and L of issuing.”
The research director of the Aite Group, Julie Conroy, also stressed that one of the most important factors to consider is ‘education’. She described the deadline as ‘anticlimactic’, but also pointed out:
“We’re going to see a snowball effect as more cards and terminals come to market and consumers get trained. Education is one of the biggest gaps in this. It will progress and then we will see adjustments to the way people pay and the way fraudsters attacks the payments system from there.”
It looks like snowballs are coming in April as MasterCard’s research suggests momentum is building. The payments giant found that 67% of US-issued MasterCard-branded consumer credit cards now feature chips, marking an increase of 51% in the number of consumer credit cards with chips in market since the October 1, 2015 liability shift.
One of the main reasons for the increase in usage is, you’ve guessed it, an increase in locations. Consumers can use their chip cards in more places, as 1.2 million U.S. merchant locations – an increase of 121%– have turned on their terminals and are accepting chip card payments. In addition to national retail chains, approximately one million local and regional merchant locations are accepting chip cards, the company added.
“Chip technology is an essential upgrade to better protect consumers and businesses,” said Catherine Murchie, senior vice president of North American Enterprise Security Solutions for MasterCard. “Other countries that have already adopted chips have seen significant reductions in counterfeit card fraud over time – as much as 60, 70 or even 80 percent.”
Obstacles to the momentum?
So is that it? An initially slow start that gradually picks up pace? Can anything stop it?
So many questions and many of them come back to Conroy’s point about education. As this recent Yahoo article shows, many consumers in the US are not satisfied by the answers given when they ask why they are being forced to use Chip-enabled cards. Many are not convinced Chip is safer because they immediately wonder how it possibly can protect users when there is no PIN and what are the chances your average checkout attendant will know to say that Chip will significantly improve how fraud is tackled because they generate unique one-time codes?
But even then, that can still be treated as a positive because consumers are showing interest and awareness of the technology. Is that across the board?
A recent survey by CardHub in the US suggests the answer is a big fat ‘No’. Six out of ten people surveyed said that they do not understand the difference between Chip and magnetic stripe card technology. Over half (56%) simply do not care if a retailer can offer a Chip-enabled terminal.
This feeling of apathy is toxic when one considers it in the context of how expensive the upgraded payment terminals are. A small PayPal Here EMV reader alone costs just under $150. A proper WorldPay Chip terminal costs just under $1000, a punishing price for any small business.
“While many merchants are shying away from the investment of upgrading their traditional terminal to EMV, they do not realise that the real cost is the fraud they accept with every magnetic stripe payment,” Daniel Klein, CEO of SumUp told PaymentEye.
“Issuers and acquirers alike may be afraid of forcing merchants to shift to EMV, risking customers going to competition. This, together with a lack of education on what benefits EMV actually brings results in resistance to change,” he added.
Ultimately, it looks like the initial obstacles of cost, complexity and education have been minimised but by no means reduced. Once people understand why Chip is being implemented, both consumers and small businesses, then things like costs and complexity become easier to tackle. Until then, one should not get carried away by the snowball.
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