By now, every business that accepts credit cards is probably familiar with the October 2015 liability shift. That shift meant that after October 1, 2015, any business that didn’t use EMV chip card-capable machines and POS systems would be liable for fraudulent transactions. Function-wise, chip cards could still be swiped like magnetic strip cards, but businesses would be the ones on the hook if anything went wrong.
As October 2016 draws to a close, where are we as a country with full chip card implementation? Turns out, still a long way from full acceptance.
In its September issue, credit card processing industry publication Digital Transactions reported that approximately 2 million businesses are chip-card-enabled, out of approximately 8 million card-accepting businesses total. That leaves quite a lot of locations not set up to take chip cards.
On the flip side, it also noted that Mastercard announced a full 88% of its consumer credit cards now have chips. As EMV becomes even more common for consumers, businesses are likely to upgrade equipment to take the cards the way they’re supposed to be taken.
In that same article, Digital Transactions states that 86% of retailers plan to implement EMV card acceptance by the end of 2016, according to a survey conducted by the National Retail Federation.
Some businesses are not yet subject to the EMV liability shift, including ATMs and pay-at-the-pump gas stations, but that will be changing in 2017.
Customer Reactions and Fixes
On the consumer side, one of the most common customer reactions to the new chip cards has been confusion, simply because some businesses have chip readers that aren’t usable yet. Most people have likely come across a fancy new chip machine only to see a piece of tape or cardboard covering the chip slot. In locations that don’t have the chip slot blocked, many consumers still hesitate at the terminal, or start to insert their chip card into the slot only to be corrected and asked to swipe the card. Others start to swipe a chip card and are instead directed to insert it into the slot.
Fortunately, confusion over how to use the cards will fade as chip acceptance becomes standard. A harder problem to combat has been the slow authorizations reported by some retailers and consumers. While magnetic stripe cards are swiped and returned to a customer’s wallet or purse in one swift motion, EMV cards must stay in the machine until the authorization is complete. At some locations, this has resulted in a wait time of 15 seconds or more. Customers express annoyance at the delay, and retailers have worried that it would slow down the checkout process, especially at peak sales times.
Addressing these concerns, the card brands have all announced “quick chip” solutions. Essentially a software update, Quick Chip (or M/Chip Fast for Mastercard) claims to cut the authorization time for chip card transactions. The update will be available from credit card processors, though not all have the ability to support it yet. There is no charge from the card brands themselves, though the processor could impose a fee for the update.
Some companies are even making “faster chip transactions” a core selling point of their services. Recently, popular smartphone solution Square announced that they’d successfully shaved more than a second off the chip card transaction time (going from 5.7 seconds to 4.2 seconds) while First Data’s updated Clover Go is said to authorize at 3.5 seconds or less. However, as both of those solutions are for smartphone/mobile processing, it doesn’t necessarily help those with full point of sale systems or countertop credit card terminals.
Of course, a huge part of the shift to EMV is the notion that it will reduce fraud and make card transactions more secure for everyone. A common misconception is that the US’s switch to chip and signature cards instead of chip and PIN means that there’s almost no security benefit over magnetic stripe cards. However, that idea fails to account for the fact that chip transactions are still more secure than magstripe because of the added encryption features present with a chip card.
As Digital Transactions reports, Visa states that counterfeit card fraud fell 47% in May when compared to the same time period of the previous year, while Mastercard announced a 54% decrease from April 2015 compared to April 2016. So far, it seems that EMV is living up to expectations as far as reducing in-person (also called “card-present”) fraud.
Fraud rates may shift again in the future, as scammers figure out how to implement “shimmers” or credit card skimmers designed to steal information from the chips. Such devices have already been found in limited locations, such as Mexico, but are so far not widespread in the United States.
PIN or Signature
As banks and the card brands in the United States almost unanimously moved to chip and signature EMV cards, there has been a lot of talk about chip and PIN. Notably, why didn’t we switch to that?
The card brands have offered an explanation, pointing out that magstripe credit cards in the US don’t have PINs and explaining that they wanted to keep that process the same. Critics lament the use of signature authorization as less secure, a notion bolstered by the rhetoric of Walmart’s PR and legal team in a lawsuit against Visa, although that lawsuit deals with debit cards, not credit cards.
So far, there is no plan to switch to chip and PIN cards in the United States, and as mentioned in the fraud reduction section, above, chip and signature cards are having a positive effect on fraud.
Where NFC Fits In
The slow authorization and general confusion over EMV acceptance has some experts predicting that NFC or contactless transactions (like Apple Pay) will become more popular. Many businesses that upgraded to EMV-capable credit card machines may also have chosen a model with built in NFC technology. However, as of 2016, mobile payments using NFC technology are further behind than EMV. Many customers don’t know to use it, and others prefer not to load their card data into their phone. Whether NFC catches on remains to be seen.
There’s no denying that the EMV liability shift has been a huge mess, in part due to the unrealistic deadlines and delays in certifying equipment that are beyond a merchant’s control. However, a year in, many consumers are becoming more familiar with the process, and EMV acceptance continues to grow at businesses around the country. It’s here to stay and will be the norm with a little more time.
Ellen Cunningham is the marketing manager for CardFellow, a leading resource for accurate information in the credit card processing industry. She writes about all aspects of credit card acceptance and enjoys helping businesses find the right solution for their needs.