As we approach the one-year anniversary of October 2015’s EMV fraud liability shift, you may be wondering how the entire process has panned out. Unfortunately, you’ll likely need to wait another year for a definitive review, as the EMV mandate transition has been decidedly messy, and most assessments say it’s barely half complete.
While the process may not be the disaster that some are claiming, it has definitely not conformed to the most optimistic projections. Here’s what you need to know.
The EMV Plan
The EuroPay MasterCard and Visa (EMV) standard utilizes chip technology to increase the security of consumers’ payment information and minimize fraud. After the October 2015 deadline, liability for fraudulent transactions in non-gasoline retail locations shifted from payment providers to the merchants themselves if they had not made the transition to become EMV compliant.
The hope had been that the liability shift would serve as an incentive for a swift and orderly transition to EMV enabled technology, but so far that hasn’t been the case. This contrasts with the rest of the world’s switch, which had mostly progressed without fuss, leading to 97 percent of transactions being EMV or mobile EMV in Western Europe, 72 percent in Eastern Europe, and 87 percent in Africa and the Middle East.
While final numbers have yet to be tabulated in the U.S., analysts say the market should count itself lucky if it manages to match Asia’s adoption rate of 40 percent by summer’s end — and Asia hasn’t even fully committed to the EMV standard yet.
Consumers Have the Cards…
Preliminary statistics show that the delay is only partially tied to shoppers’ wallets, as most consumers have already received new cards with EMV chip technology. Visa says that 58 percent of its branded cards in circulation now contain the chip, while MasterCard says that 67 percent of its cards have already switched.
Estimates for overall dispersal rates regardless of provider range widely, from a low of 40 percent of total consumers to a high of 70 percent.
…But Do Merchants Have the Terminals?
In a word: no.
It seems that plans for the EMV rollout did not properly account for the fact that the U.S. is the most complicated payment market in the world. While merchants in Europe and other areas usually have to deal with fewer than a dozen total payment providers and large issuing banks, retailers in the U.S. must contend with a vast web of hundreds of entities.
Every separate component in the payment process must be evaluated, verified and approved, from the EMV credit card terminal itself to the network connections, processing servers and more. Add in hundreds of payment processors, acquirers, and banks, and it starts to become clear why many merchants are still waiting for their new EMV systems to be approved nearly a year after the transition deadline. While Visa recently announced an initiative to streamline the approval and verification process, the simple fact is that most consumers are still shopping at stores that don’t have working EMV terminals.
Of the 20 largest members in the National Retail Federation, only 11 are totally compliant with the new EMV system, and that compliance rate drops sharply for smaller retailers.
Visa estimates that barely 30 percent of merchants in its networks are fully EMV operational, and experts say less than 15 percent of total merchants are currently EMV compliant.
In short, the EMV transition is still very much in progress, although analysts expect the adoption metrics to improve significantly by the end of the year.