There are sometimes advantages to being a late adopter. For example, many parts of the developing world lacked extensive telecommunications infrastructure during the 1980s. But then along came mobile technology, and these countries didn’t have to invest in expensive telephone lines. They were able to leapfrog over the older technology completely. And they could also learn from the growing pains of mobile markets that preceded them.
The United States faces a similar situation.
Although EMV Chip and PIN technology is already universal in other parts of the world, the U.S. has been slow to adopt these more secure credit cards. Below are lessons that American merchants and consumers can learn from countries that have already adopted EMV-enabled payment systems:
1. EMV Technology Does Combat Credit Card Fraud
Experts predict that U.S. merchants will have to invest $2.6 billion in order to replace older credit card terminals. But according to numbers out of the United Kingdom, the investment is well worth it. Fraudulent losses fell by more than 70 percent over a four-year period once the U.K. implemented EMV technology.
2. It’s OK for Merchants to Take a Stand
As new liability laws go into effect in 2015, both merchants and credit card issuers face unprecedented risks regarding fraudulent activity. Although it’s not customary for businesses to decline perfectly legitimate credit card transactions, this hasn’t stopped Belgian merchants from taking a stand.
At one restaurant, a waiter refused a non-EMV credit card presented by an American traveler. The reason? That restaurant didn’t want to be responsible for any fraudulent losses that might have occurred as a result of this less secure technology.
Although that restaurant may have lost a sale, it also protected itself from even greater risks — like losing a merchant account or paying exorbitant fees later on.
3. The Transition to EMV Is Possible
Americans don’t like change — at least mandated change. This is why the metric system hasn’t taken hold.
But switching over to EMVs is a lot easier than many people realize. If Canada can do it, there’s no reason why we can’t as well. By 2015, our neighbors to the north will no longer accept magnetic credit cards at point-of-sale terminals.
4. The Transition Will Hurt before It Gets Better
Hardware updates aside, moving over to EMV technology will be a hassle. And during the migration, we can expect fraudulent activity to spike as thieves rush in to make last-minute grabs.
Brazil experienced something similar to this when it moved over to the EMV standard. Fraud momentarily shot up. But after completing the transition, the country saw a 27 percent increase in international credit card activity. It appears that foreign travelers finally regarded Brazil as a safe place to shop — and local merchants reaped handsome rewards as a result.
5. A Global EMV Lesson for Everyone
In markets that have already adopted EMV technology (i.e. everywhere but the U.S.), credit card fraud has plummeted. But fraudulent activity hasn’t quite reached 0 percent.
It probably never will.
EMV Chip and PIN cards do offer tremendous fraud protection. But no payment system is 100 percent safe, 100 percent of the time. For example:
- The virus that attacked Target managed to steal customer data from within the memory chips of point-of-sale devices (where financial data are usually unencrypted). Had the company already had EMV technology installed, it still would have been the victim of a major data breach.
- In the online world, EMV technology doesn’t offer any more protection from fraud than magnetic swipe-and-sign cards do. In fact, online fraudulent activity could double to $6.4 billion by 2018 (precisely when EMVs become universal in the United States).
The lesson in all of this?
After becoming EMV-ready, you can’t rest on your laurels. Preventing credit card fraud is an ongoing battle that requires constant analysis of your payment infrastructure.
To learn more, see relevant information in the links below: