Almost six months after the EMV chip card liability deadline, merchants and issuers are still lagging behind when it comes to EMV-enabled point-of-sale system implementation, leaving systems vulnerable and consumers confused.
However, experts said they are not surprised.
"I think we are where we expected to be since the U.S. market is the largest and most complex payment ecosystem in the world, and there's no mandate or requirement that retailers participate in the EMV migration," Randy Vanderhoof, executive director of the Princeton Junction, N.J.-based Smart Card Alliance, said. "The result is there is going to be a mixed response. That is what we are seeing."
The four major U.S. credit card issuers – Visa, MasterCard, American Express and Discover – established Oct. 1, 2015 as the day when credit card fraud liability shifted to merchants if they did not have an EMV payment system ready.
"There are very few issuers that really wanted to do this," Michelle Thornton, director, product development for the Rancho Cucamonga, Calif.-based payments CUSO CO-OP Financial Services, said. "Just like very few merchants wanted to do this. It is as we all predicted, it is going to take a while."
Although it is still too early in the transition process to draw any conclusions about fraud upticks, two card fraud trends have begun to raise some eyebrows.
Last year, the security firm Experian serviced about 3,550 card breach incidences, according to Experian data breach resolution vice president Michael Bruemmer.
"It is down about 20 to 25% versus last year so far," Bruemmer said. "In terms of overall rate it has gone down. Two thirds of security incidents involving payment cards are still coming from the old mag stripe. So from that it seems like more people have not turned on or adopted the [EMV] technology."
There is a wide spectrum of retailer engagement in EMV, Vanderhoof noted, including merchants that consciously made the decision not to upgrade. Other businesses were very proactive in getting their systems upgraded before the liability shift, he added.
"They are just going to take the risk and see what happens," he said of the merchants that chose to opt out.
In the middle of the spectrum are businesses still in transition, Vanderhoof said. These businesses may have invested in the hardware but not the software, so while their terminals are capable of supporting EMV, they opted not to activate the technology yet. Alternatively, they might be waiting for their processor's testing certification or approval.
For credit unions, the migration has mainly led to member confusion. Thornton explained members call to ask why the chip card does not work at certain merchant locations or what is wrong with the card.
"Then the credit union has to tell them it is a merchant issue," he said.
Thornton added, "The reports we're hearing from our credit unions is that it is a bit of the Wild West out there as far as what you are going to run into. Merchants having it on one day, not having it on other days."
Read the latest on the EMV migration in the March 30, 2016 print issue of Credit Union Times.
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Roy Urrico
Roy W. Urrico specializes in articles about financial technology and services for Credit Union Times, as well as ghostwriting, copywriting, and case studies. Also: writer/editor of a semi-annual newsletter for Association for Financial Technology since 1997 and history projects funded by the U.S Interior Department, National Park Service and Warren County (N.Y.).
