EMV Credit Card Adoption Proceeds, But Merchants Holding Back Progress

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It's been one year since the United States credit card industry took a major step in its migration from credit cards with magnetic strips to cards that use the more fraud resistant EMV technology. On October 1, 2015 the industry underwent a liability shift that imposed the cost of in-store credit card fraud on the retailer or card issuer that failed to upgrade its technology to be compatible with smart chips.

Progress After Year One

One year into this process, progress has been steady. According to Visa's August 2016 Chip Card Update, there were approximately 630 million Visa chip transactions in July of 2016, representing more than a tenfold increase over the same numbers last year. In addition, nearly 1.5 million merchants reported accepting chip cards by August, which is more than a 385 percent increase over the previous year. In addition, the number of Visa chip cards in the United States exceeded 363 million in August of 2016, a 156 percent increase over the previous August.

As a result, Visa now claims that merchants who have completed the chip upgrade experienced a 47 percent decline in counterfeit fraud dollars in May compared to the same time last year.

Signs of Lagging Acceptance

Statistics showing tenfold increases in transactions and a nearly fourfold increase merchants accepting chip cards sounds impressive, but perhaps not upon close examination. These statistics compare rates before the migration began in earnest last year, so they are starting with a very low baseline. In addition, the increasing number of chip cards in the hands of consumers can also be a positive sign, but it may only reflect the natural adoption of new technology as card issuers replace expired cards.

The most troubling statistic is the fact that only 32 percent of storefronts now accept chip cards, a full year into the migration. With chip cards widely in the hands of cardholders, shoppers still face less than a one in three chance of being able to actually use a terminal that will read their chip, and most stores still require cards to be swiped, just like they have been for decades.

What's Going On?

As most consumers have realized, the chip compatible hardware is often deployed in the store, but with its chip reader still inactive. In what represents a major image problem, many retailers have been forced to crudely tape over the chip reader in their new terminals, and create hand written signs indicating that the chip readers are not functioning. The slow migration of retailers to this technology, as well as the frustrating length of time that it takes some machines to complete these transactions, has made cardholders impatient and skeptical of the state of the migration.

All of these factors have created a major image problem for the credit card industry, and many already view the EMV implementation as a failure. Certainly, the industry has recognized the challenges that it's faced in rolling out chip card reading terminals and software. For example, earlier this year, Visa announced changes to speed implementation of its chip card readers at retailers.

As the migration continues, look for merchant adoption rates to indicate its true progress.

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