By 2018, EMV credit card penetration in the United States is expected to approach 100 percent. But this is three years after new EMV liability laws go into effect in 2015. Despite being mandatory in most other countries, these chip-enabled credit cards have enjoyed relatively slow adoption in the largest consumer market on the planet.
But why have a deadline at all? And how prepared are American merchants for the transition?
The EMV Credit Card Deadline: What Does It Mean?
Short for Europay, MasterCard and Visa, EMVs are chip-enabled cards that offer greater protection from fraud. They come in two main varieties:
- Chip & Signature: The customer signs his or her name in order to complete an in-store transaction.
- Chip & PIN: The customer enters in a personal identification number to complete a purchase.
Cloning these chips is very difficult. In order to successfully make a purchase in a retail store, the card must physically be present. Consequently, EMVs are more secure than their magnetic counterparts. The goal of these liability laws is to place greater pressure on whichever side of each transaction doesn’t leverage these extra security features:
- If a shopper uses an EMV credit card at a non-EMV-terminal, the merchant is responsible for any fraudulent losses that may occur.
- If a shopper uses a non-EMV credit card at an EMV-ready terminal, that shopper’s credit card issuer is responsible for any potential losses.
This deadline will have a powerful impact on the United States — a market responsible for 25 percent of global credit card use but 50 percent of total credit card fraud.
How Prepared Are Stateside Merchants for the EMV Crossover?
Despite being a 20-year-old technology, EMVs have barely taken root in the United States. Part of this stems from lack of awareness, although this is quickly changing as the liability laws receive greater exposure.
Part of it also stems from the relative lack of EMV credit cards in consumer wallets. Issuers have only recently begun sending out chip-enabled cards to their customers.
But probably the biggest hurdle is cost. U.S. merchants will have to invest $2.6 billion to completely update their payment infrastructure.
How’s the progress to date?
The results are mixed. By the end of 2014, roughly 25 percent of credit and debit cards in circulation will be EMV-ready. Reports still vary on what percentage of merchants will have updated their credit card terminals by year’s end.
By 2015, 75 percent of cards are expected to be EMV-ready.
But as mentioned before, full adoption (at or approaching 100 percent) probably won’t happen until 2018, with smaller businesses representing the primary bottleneck. These estimates may be revised as major retailers like Sam’s Club, Wal-Mart and Target update their payment systems well ahead of schedule. Their movements could have a powerful influence on other U.S. retailers.
No matter the timeline, latecomers will face the biggest risks as fraudsters target the low-hanging fruit within America’s payment industry. To limit your liability, it’s worth exploring EMV technology sooner, rather than later.
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