Earlier this month, the long-awaited EMV (EuroPay, MasterCard and Visa) liability shift, which requires merchants to implement EMV-compliant point-of-sale terminals in their stores, officially took effect. Retailers that fail to provide support for chip-enabled credit cards will now assume responsibility for fraudulent transactions. However, if preliminary news reports are any indication, there seems to be confusion among consumers about when, where and how to use chip-enabled credit cards.
In fact, according to a recent survey from ACI Worldwide, a provider of electronic payment and banking solutions, 59 percent of consumers surveyed reported that they have yet to receive a new chip-enabled card, while 67 percent said that they have not received information from their credit card issuer or bank explaining what EMV means and how it will impact them. Of those who have received chip-enabled cards, only 32 percent are aware that the U.S. is moving to EMV, and the majority did not know the real reason that they received a new card.
According to Michael Grillo, director of product marketing for ACI Worldwide, many banks have likely decided to reissue their cards in waves due to the costs involved with reissuing cards to their entire customer base all at once.
“I think the banks are looking at this seriously because it is, for the first time, an opportunity for them to take themselves out of the liability equation whereas before they shouldered the burden with these types of card transactions,” said Grillo. “In some cases, (card issuers) may be looking at some of the more risky accounts in their portfolio, which could be anything from people who travel internationally more or maybe they have higher limits on those cards, and so maybe they re-issued some of those cards first. Part of it is, I think, just the standard reissue strategy, so if cards are intended to be renewed or expire in this quarter, they might have just said, ‘We will let them reissue when they’re supposed to reissue.’”
Beyond the fact that nearly two-thirds of consumers don’t have chip-enabled cards yet, Grillo said he was also surprised that the same amount of people didn’t know what EMV was. Grillo said that the industry, both retailers and banks, have certainly done a poor job of making consumers aware of this shift and what the implications are for them.
“First and foremost, we’re really looking at a change in behavior for consumers in terms of how they would use a card at the checkout register. That’s a fundamental change in how consumers are used to doing their transactions and how they go through,” added Grillo. “If you look at some of the other countries or markets that have gone through the same EMV transition, take the UK for example, they had a mass advertising campaign on TV, radio and print publications backed by the government to educate and make their people aware of the changes that were coming, what they could expect and why they were doing it. That has been largely absent here.”
As more of the larger retailers bring their EMV-compliant payment terminals online, Grillo believes the use of chip-enabled cards will help to reduce fraud, which may subsequently trickle down to small- and mid-sized businesses that do not support EMV. There will also likely be an increase in application or account takeover fraud as thieves look for other avenues to exploit.
Grillo said he expects that only 50 percent of credit cards will be chip-enabled by early next year, but the majority will likely be converted by the end of 2016. When it comes to debit cards, however, Grillo said they probably won’t be chip-enabled until 2017 at the earliest. On the merchant side, Grillo believes that 30 percent of the larger retailers will be ready for the shift by the end of this year with the majority making the migration sometime next year.
While many have advocated for the implementation of chip-and-PIN credit cards in the U.S. to add yet another layer of protection for payments, Grillo said that chip-and-signature will be the standard for the foreseeable future as many people are hesitant to throw-in additional complexity to the process.
“The PIN version of the chip card adds another level security and certainly has a stronger security protocol to it, but I think given the fact that it has taken us this long to move to chip-and-signature, I would be surprised at how quickly chip-and-PIN follows at least on the credit side. With debit cards, it’s not an issue, but I think we need to get through the confusion with chip-and-signature before we think about how we move to chip-and-PIN.”
