In the United States, new liability rules governing EMV credit card processing went into effect. Starting in October 2015, those rules shifted responsibility for fraudulent losses on whichever side of a given retail transaction that isn’t EMV-ready:
- When a customer uses a chip-enabled EMV card on a merchant's legacy terminal, that retailer must cover any fraudulent losses.
- When a customer uses an older magstripe credit card on a merchant's EMV terminal, the card-issuing bank is held responsible for fraudulent losses.
Given how costly credit card fraud is, there is tremendous incentive for both businesses and card issuers to adopt the EMV standard. However, the U.S. continues to lag behind most other major retail markets, despite the advanced warning that stateside merchants and banks received prior to the October 2015 deadline.
Where Do We Currently Stand with EMV Adoption?
Credit card issuers have done a better job of making the transition. This is because they are already accustomed to shipping new plastic to users on a regular basis.
By the time the deadline arrived, roughly 60 percent of U.S. consumers had these more secure cards in their wallets. What’s more, 100 percent penetration could theoretically happen within the next 12 months.
However, user-side adoption is heavily slanted toward big spenders. For households earning less than $35,000 a year, EMV penetration has barely cracked 20 percent. Nearly 70 percent of households earning $100,000 or more now carry chip-enabled credit cards.
Merchant-side adoption is a little less impressive.
In order to process EMVs as EMVs, merchants must invest in new terminals that can read these chip-enabled cards. Nationwide, such upgrades will cost retailers billions of dollars. In addition, storeowners must train their employees how to properly process EMV transactions, including refunds, credits and chargebacks.
By the time the October 2015 deadline arrived, just over 25 percent of U.S. retailers were EMV-ready. Again, this number is heavily skewed toward larger players. Seventy-two percent of smaller retailers still were not compliant by the beginning of the first quarter of 2016.
Because of the aforementioned hardware and training expenses, it may be a while before retail adoption of the EMV standard becomes truly universal. We probably won’t see 90 percent adoption until 2017. What’s more, 100 percent penetration may have to wait until 2018 or beyond.
Many merchants simply don't feel the need to switch — even with the liability rules in place.
What Does This Mean for Your Business?
If you are like many U.S. merchants, you may have delayed making the transition to EMV payment processing. Perhaps you feel like the upfront cost and hassle simply aren’t worth the extra fraud protection that EMVs provide.
Though as long as the retail market remains fragmented, businesses that still rely on legacy terminals are much easier targets for thieves. However much fraud your company encounters today, it will likely go up as more of your competitors move over to the more secure EMV standard. In addition to the fraudulent losses you’ll have to cover out of pocket, you’ll also need to invest countless hours disputing each unauthorized claim that enters your system.
At BluePay, we can help update your payment processing without incurring huge costs or wasting invaluable time. Contact our EMV security team today to learn more.