Today’s EMV Landscape at Retail in the United States
Now more than six months after the EMV liability shift in the U.S., the retail landscape is varied and indicative of a gradual process that will take a few years for full deployment. Although recent surveys show a mixed bag when it comes to EMV compliance, along with various issues among stores and shoppers impacting implementation, predictions are positive for the ultimate goal of minimizing card present fraud, which is a part of the approximately $8 billion in fraudulent card purchases made each year in the U.S.
According to a recent EMV Adoption Survey by credit card comparison group CardHub, which evaluated 55 major retailers and 1000 consumers, 42 percent of retailers have not updated any terminals to EMV in any of their stores, including Albertson’s, Meijer, Aldi, Bed, Bath & Beyond, Ace Hardware, Staples and Neiman Marcus. Some merchants, like Kroger, Lowes and Costco, have EMV capabilities in some, but not all, stores. Of those surveyed, 29 percent were fully compliant with EMV, including Walmart, Target, Home Depot, Walgreens, Best Buy and CVS Caremark.
This same survey also showed that 56 percent of card users polled don’t care if a retailer’s payment terminal is chip-enabled. That may be because 41 percent of these respondents don’t have or know if they have a credit card with a chip; and 40 percent said they have never executed a chip transaction. One-half of respondents don’t know whether chip cards offer better fraud protection compared to traditional magnetic stripe cards.
Given that retailers now face liability for fraudulent transactions, and that controlling costs is imperative amidst intense competition and thin margins, why aren’t more on board yet with EMV?
- Significant investment – EMV is more than just new card readers, but also requires new software, integration with existing systems, testing, certification and training. Costs can range immensely, but easily can be into the tens of thousands of dollars, depending on the size of the implementation.
- Software availability, gateway and processor readiness – Developing EMV software is complex and time-consuming, and not all gateways, terminals and processors are fully EMV-ready, as payment processors are overwhelmed to satisfy the demand.
- Certification backlog – A typical EMV certification process may take three to six months to complete, and queues are still quite long.
- Unnecessary – Some smaller merchants who don’t deal with measurable card fraud are opting out, deeming the return on EMV investment simply not worth changing systems.
Shoppers most likely have witnessed or experienced firsthand the confusion among customers as to swipe or dip their cards to complete transactions. One issue is that as many as 30-45 percent of merchants with EMV terminals haven’t yet activated them, most likely due to software or certification delays. So associates have to guide each customer.
And of those with active EMV, malfunctions with the reader may occur, thereby requiring the customer to dip the card more than once. Even in a perfect world, the processing and transaction time with EMV is noticeably longer than with magnetic swipe cards, which can frustrate customers and lengthen checkout lines.
In addition, initial reports have indicated that some retailers are facing a noticeable increase in chargebacks, even when they may not be definitively due to fraud. This may be due to systemic issues in terms of identifying which counterfeit transactions are directly attributable to EMV.
And beyond face-to-face transactions, online commerce is expected to see increasing fraud. According to online fraud prevention company Trustev, the rate at which online fraud has jumped is faster than anticipated.
The Payments Security Task Force projects that 98 percent of cards will be chip-enabled by the end of 2017, and a report by The Strawhecker Group estimates that EMV readiness will increase to 90 percent of retailers in 2017. The National Retail Federation estimates that it takes the average retail store approximately 19 months to implement a new chip card payment system.
And even then, some experts recommend transitioning from a signature CVM to a PIN, which retailers have requested and which is used in most other countries because it is more secure.
With greater EMV implementation, contactless payments that use Near Field Communications (NFC) are expected to rise, provided that retailers enable software on their card readers to accept this form of payment. Not only are these transactions faster than chip cards, but also are more secure due to several layers of dynamic encryption.
Despite a complicated and lengthy adoption process, ultimately, EMV will help enhance payment security.
About the Author
Andrey Tikhonov is the Senior Director of Payment Technology at Infinite Peripherals, Inc., and also is a certified TG-3 Auditor. Infinite Peripherals was the first company to enable Apple® products with mobile POS devices and now has more than 1 million solutions on the market and products in 30% of the top 20 U.S. retailers.
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