In most parts of the world, EMV credit and debit cards aren't simply preferred — they’re mandatory.
Short for Europay, MasterCard and Visa, EMVs come with chip-enabled technology to help prevent credit card fraud. Because the chips can't be duplicated, EMV cards must be physically present for all retail purchases. And in order to complete a transaction, the customer must either:
- Provide a signature (with Chip and Signature EMVs)
- Enter a personal identification number (with Chip and PIN EMVs)
For more information on the differences between Chip and Signature & Chip and PIN, click here. As a result of these security features, most major markets around the world have already adopted EMV credit cards as their official standard. In fact, American tourists often discover that they can't use their magnetic credit cards at retail locations in Europe and Asia.
But in the United States, EMVs have yet to become universal. The technology is optional — both for merchants and credit card issuers. However, the landscape is quickly changing as new liability rules go into effect. In instances of credit card fraud, whichever side of a transaction that isn't EMV-ready will have to pay penalties:
- If a merchant uses a legacy terminal to process a consumer's EMV credit card, that merchant must cover any fraudulent losses that may occur.
- If a customer uses a traditional credit card at an EMV terminal, the card issuer is responsible for any fraudulent losses.
The new liability rules go into effect in October 2015. With 9 months to go, where does the U.S. retail market stand?
How Prepared Are U.S. Merchants for the 2015 EMV Deadline?
America's EMV readiness is a mixed bag.
Banks and card issuers have begun sending out EMVs to their customers with much greater frequency. According to some estimates, the total number of cards could reach 100 million by the end of 2014. Other experts believe that nationwide penetration could approach 25 percent before the year is out.
On the merchant side, progress is substantially slower.
Sam's Club and Wal-Mart made headlines when they decided to begin accepting EMV credit cards well ahead of schedule. But most other retail stores still lag behind.
The primary hurdle is cost.
The hardware updates alone could cost US merchants more than $2.5 billion over the next few years. And in order to successfully complete the transition, stores must also invest in employee training and customer education.
Deadline or not, many businesses continue delaying their upgrades. Small businesses are especially resistant — despite the fact that they have the most to lose by not updating their payment infrastructure.
Consequently, it is unlikely that EMV penetration will reach 100 percent before 2018.
What Is Your EMV Readiness?
The above national statistics are worrisome. But as a retailer, you should be more focused on what the approaching deadline means for your own business.
Don't view upgrading your payment technology as a cost. Think of it as an investment that protects both you and your customers from fraudulent credit card activity. Embracing EMV technology reduces your liability exposure. And it can also help boost consumer confidence in your store's payment processing.