EMV chip card technology is a growing force in the payments industry. According to EMVco, as of Q4 2013, worldwide EMV deployment and adoption estimates are approximately 2.3 billion EMV chip cards and 37 million terminals/devices. With card adoption rates averaging 42.8% and terminal adoption rates at 86.2%, indications are that this technology shouldn’t be ignored. EMV compliance is already making traction in the United States, and if you haven’t prepared, now is the time to do it as the October 2015 Liability Shift date is fast approaching.
Security Breach & Adoption of EMV
EMV chip cards (Europay, MasterCard, Visa) was established in the ‘90s and became the standard throughout Europe on January 1, 2005. Though there was some initial uncertainty about how and when the chip would arrive in the U.S., the tide seems to have turned. The U.S. adoption rates are on the rise for EMV technology, which offers significantly more security than the traditional magnetic stripe for card present transactions.
Well-publicized security breaches over the last year served as catalysts, driving many U.S. retailers to evaluate their current POS technology and back office infrastructures, and putting a higher priority on EMV migration. Although many companies have been slow to embrace EMV, the potential of negative press and being targeted by fraud criminals has proven that a more secure payments system is a necessity.
Many retailers are pushing to update their POS devices by October 2015 in order to accept chip cards. That way, credit card issuers who already have chip cards in the market will be able to transfer the liability for fraudulent transactions back to those merchants whose terminals are not chip-enabled. In October 2016, that liability shift will extend to ATMs, and in October 2017, it will extend to automated fuel dispensers (AFD).
Who’s at the Forefront of the EMV transition?
Walmart, Sam’s Club, and Target are among the early big box retailers migrating to chip-enabled devices as well as reissuing their co-branded credit cards. Sam’s Club cardholders received replacement cards in their mailboxes this past June. At this point in time, more than 4,000 Walmart stores, and all 635 Sam’s Club locations will be able to accept chip cards at their point-of-sale.
With such big-name players making the change ahead of schedule, momentum for others to establish a timeline for rollout is growing. The Smart Card Alliance estimates that there are 10-15 million EMV-enabled credit cards in the United States, although that still represents less than 2% of the total card market; of the 10 million point-of-sale devices in the U.S. market, roughly 1 million (or 10%) are EMV-capable, meaning they are EMV-equipped even if the technology is not turned on. In other words, a lot of work remains.
How Can You Get Ready for the liability shift?
October 2015 is just around the corner, so you must formulate your plans now. Incorporate EMV technology migration into your budget, your card re-issuance strategy, and your internal and external communication plans. Review your card reissuance cycle monthly as you will have a number of customers who need cards reissued because of expiration or compromise. Work chip cards into your reissue cycle, rather than waiting until the liability shift deadline when you may be faced with making the switch all at once, which could create resource strains for you and your partners, and potentially impact your cardholders’ experiences.
According to an Aite Group report, credit and debit card fraud costs the United States $8.6 billion a year. Making the switch to EMV sooner, rather than later, will help minimize how much of that comes out of your pocket.
While the EMV chip is not a silver bullet, it is an improvement over magstripe. It may not have prevented some of the recent major breaches, but it would have reduced overall damage since there would have been fewer cards vulnerable to counterfeiting. It also will help create a more secure payments experience for your cardholders.