From online commerce to retail shopping to Wall Street, the U.S. is accustomed to being the world’s financial leader. But when it comes to EMV technology, we’re the latecomers to the party.
Short for Europay, MasterCard and Visa, EMV chip-enabled credit cards (“smart cards”) have already become the standard worldwide, championed for their fraud protection and security features. However, despite being nearly 20 years old, EMV technology has barely touched American soil.
But this is changing.
According to the Smart Card Alliance, American credit card issuers will send out more than 100 million EMVs by the end of 2014. Some estimates are nearly twice that, suggesting that EMV credit cards could approach 25 percent of all American plastic.
Whether 100 million or 200 million, this represents an unprecedented surge in a technology that the American credit card market has ignored for two decades.
Why EMV Smart Cards Are Becoming Mainstream in the States
One reason behind this sudden spike in EMV technology is rising consumer demand for more secure payment options. The U.S. has roughly 25 percent of all credit cards and debit cards, but nearly 50 percent of all credit card fraud.
Another reason is convenience — especially for Americans who travel abroad and can't use their magnetic swipe & sign cards at international stores.
But arguably the biggest factor is the new liability rules that will go into effect in 2015. Retail stores that aren't EMV-ready are responsible for any fraudulent losses if customers make purchases with smart cards. And credit card issuers must cover losses if their clients continue using older cards on readers that accept EMVs.
100 percent EMV smart card penetration probably won't happen until 2018. This is because American merchants must upgrade existing hardware in order to begin accepting EMV credit cards. The transition could cost American retailers $2.6 billion, with small businesses probably the last to completely abandon legacy credit card terminals.
Then again, the transition could happen earlier than expected as growing awareness of EMVs’ extra security features force retailers and credit card issuers to bow to public demand. Chase, Sam's Club and Wal-Mart have already taken the lead — a move that could encourage others to follow suit.
Should You Invest in EMV Terminals at Your Retail Store?
By the end of this year, 25 percent of your customers will already have EMV credit cards in their wallet. And by the end of next year, the technology will essentially be mandatory.
In other words, it makes sense to upgrade your credit card payment infrastructure as soon as possible. Doing so is an investment — but one that pays for itself when you consider higher potential sales and fewer fraudulent claims.
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