The Raw End of EMV


It has now been almost a year since the October 2015 EMV credit card liability shift in the United States, and—perhaps not surprisingly—businesses are getting the raw end of the deal. Brick-and-mortar businesses are fighting for themselves, and online retailers are seeing a new influx of fraud. Is there any hope for better protection?

While most major retailers have migrated to the new chip-and-PIN system, the same can’t be said about other businesses. As of late February, only 37 percent of all merchants had converted to EMV (Europay, MasterCard, Visa) card acceptance. But underwriters remain confident that mass adoption isn’t long off.

“Based on our recent client surveys, we expect 50 percent of locations to be enabled by the end of this year,” said Visa, Inc. CEO Charles Scharf in a first-quarter conference call. “While we know we have a long way to go over the next few years to reach the critical mass of adoption that we desire, we feel very good about the progress to date.”

While EMV adoption rates are lower than anticipated, credit card companies are moving ahead with chip card issuance. More than 200 million Visa-branded chip cards had been issued by the beginning of April, meaning about 72 percent of Visa credit cards are chip-enabled.

The Strawhecker Group (TSG) is even more optimistic about the outlook for adoption. According to its research, 50 percent of merchants should have had EMV-equipped terminals by June. However, the consulting group predicts that the United States won’t reach 90 percent acceptance until at least 2017.

“It appeared that some merchants delayed EMV migration completely until the holiday season ended to prevent friction and confusion at the checkout line,” says Jared Drieling, business intelligence manager at TSG. “I suspect that we’ll see them aggressively ramp up plans to migrate.”

Roadblocks to Adoption

While credit card companies may be quick to blame merchants for not accepting chip cards at higher rates, it hasn’t been easy for merchants. There are a number of reasons why merchants are shying away from migrating to EMV-equipped terminals, and using these terminals after they are installed. The following issues seem to be most prevalent:

Poor media coverage. In the aforementioned TSG study, 40 percent of respondents said they felt the media coverage of the liability shift had a negative influence on implementation efforts. Many felt like the coverage confused more than it helped. “It was a Y2K kind of scare thing,” one respondent told TSG. “’The world is going to end if you don’t take care of EMV.’”

But even when the facts were presented, most small businesses felt underinformed in regard to EMV rules, requirements, and deadlines. And speaking of deadlines, merchants felt blindsided by the Oct. 1, 2015 deadline, which landed right between the back-to-school and holiday shopping seasons.

POS confusion. Many smaller merchants are simply saying, “We don’t want to deal with this.” Merchants that have EMV-enabled terminals are reporting increased wait times and increased frustration at checkout counters.

Customers and cashiers are often unsure of which method to use, whether to accept signatures, and how to process debit versus credit transactions. Some merchants even feel like the confusion is negatively impacting sales.

Certification complications. What many merchants didn’t hear much about last summer but are experiencing now is how expensive and time-consuming EMV certification is. One Florida-based supermarket is even suing over the certification complications.

Even though it installed new card readers and shifted to EMV well before the liability date, the chain has yet to be certified by the card consortium managing the rollout.

“The ‘certification’ process is controlled by the very entities that benefit from the liability shift, and it is the primary means through which defendants’ illegal conduct has been able to flourish,” charges a class-action suit filed by B&R Supermarket, Inc. “The result has been massively increased costs for chargebacks being laid at the feet of the Class members, while the issuing banks have been spared those same costs, and the networks have continued to profit.”

This underlines the final major issue surrounding the shift in EMV liability: chargebacks. While the ultimate goal of EMV-enabled terminals is for fraudulent purchases to decrease, the reality is that credit card companies are currently the only ones benefiting. Merchants are exposed to much greater liability—and will be for months to come.