The EMV liability shift recently celebrated a one-year anniversary in the United States. In October 2015, new liability rules went into effect. Whenever credit card fraud occurs at a physical POS terminal, the blame is placed on whichever side of the transaction isn’t EMV-compliant.
In other words:
- If you have an EMV terminal but the customer uses a traditional swipe-and-sign credit card, the card-issuing bank is responsible for any fraudulent losses.
- If you have a legacy terminal but the customer uses a chip card, then you (as the merchant) are responsible for any fraudulent losses.
These rules were announced many months ago, giving card issuers and merchants plenty of time to update their systems.
Has the U.S. become 100 percent EMV-compliant yet?
Not even close.
This isn't all that surprising. Several years ago, many experts predicted that the EMV transition would be slow — primarily due to cost.
In order to accept the EMV standard, retail merchants must replace legacy terminals with machines capable of reading the security chips embedded in each card. When adding up all of these upgrades nationwide, we’re talking about $2.6 billion in investments — and that’s just for the hardware — you also have to factor in employee training.
It's no surprise that chip cards haven’t become universal — but how is the U.S. retail market doing now one year after the liability shift was implemented?
EMV Penetration in the U.S. Retail Market
To be honest, the numbers are mixed. Card issuers have done a fairly good job of equipping their customers with chip-enabled plastic. Roughly one year ahead of the deadline, nearly 25 percent of shoppers had chip cards in their wallets. In February 2015, more than 120 million chip cards were in circulation.
Today, that number has reached 600 million.
Explaining these numbers is relatively easy: Card issuers are already accustomed to sending new plastic on a regular basis. As the EMV deadline approached, they simply stopped shipping traditional credit cards and began sending chip-enabled cards, instead.
The merchant side is a different story.
As of right now, roughly 27 percent of all brick-and-mortar establishments across the country have EMV-ready terminals. Even this low number is below what some experts had predicted.
Worse still, 90 percent penetration won’t likely happen until 2017 or 2018 at the earliest. Reaching 100 percent saturation is probably unrealistic.
Size is one major factor in all of this. Smaller businesses usually have fewer resources to devote to hardware upgrades and training. As might be expected, mom-and-pop merchants represent the lion's share of EMV holdouts.
Though according to the Strawhecker Group, industry also plays a role. After analyzing different companies, it discovered that the type of business you’re in may influence how quickly you adopt the EMV standard — regardless of company size. Approximately 25 percent of bookstores, for example, are now EMV-ready. Yet, a whopping 70 percent of shoe stores have already made the switch.
However, don't get lulled into a false sense of comfort. Even if the majority of your direct competitors haven't adopted chip-enabled technology, this doesn't mean that you should continue holding out as well. In fact, making the switch can actually make you more competitive — both in terms of fewer fraudulent losses and heightened consumer confidence.
For help updating your payment infrastructure, contact BluePay’s EMV credit card processing team today.