How has the implementation of EMV chip cards gone in the U.S. given the October 2015 deadline? There appears to be more work that needs to be done. According to a recently published piece by Greg Buzek, President of IHL Services, only 8.5 percent of merchants are able to accept the new cards, which he describes as “EMV ready.” At last count, less than 40 percent of consumer debit and credit cards contained the necessary chip.
This technology is already in place across Europe and Canada. Instead of using the old-school technique of “swiping” credit cards to gather information from the magnetic strip, the consumer is supposed to insert an EMV card into the front of the card reader (a process called “dipping”) and wait for the transaction to complete before extracting it from the machine.
The reason for the October 2015 mandate is not a secret. As Paula Rosenbloom points out in Forbes, banks and the credit card industry pushed for it to transfer risk from the banks to retailers. Consumers do not have any credit card-related risk, but retailers who are not EMV compliant now assume the liability for fraudulent transactions arising from stolen credit cards.
Walk into most retail stores and you’ll see that they have updated their sales terminals to accommodate swiping or dipping. Although this flexibility is available, a limited number actually ask you to dip. If you go to Target, CVS, Rite-Aid, Home Depot, Walmart and some independent retailers, consumers will be asked to dip. Otherwise, swiping still seems to be the norm. One of the key reasons for this slow transition is the fact that dipping increases the duration of the transaction, because the EMV card has to remain in the reader until the transaction is complete. While the increase in transaction time is in seconds or minutes, this is still enough to irritate many consumers and deter them from dipping.
According to Bloomberg Gadfly, new sales terminals that read EMV chip cards also include “near field communication” technology, which allows consumers to wave their phones near a terminal to make purchases. As a result, growth in EMV terminals combined with consumer impatience regarding dipping could boost in-store phone payments.
Although mobile payments, like Apple Pay or Samsung Pay have gained only a small share of the payment process, Chris Gardner, chief product officer of PayPal’s Paydiant team, expects that near field communication technology will increasingly displace cards at the point of sale as consumers grow frustrated with EMV chip cards. Gardiner explains, “EMV will benefit mobile [adoption]. It’s very unnatural and it takes a long time — it [EMV] is slow as molasses and pretty much every mobile phone factor is better. Our banks keenly want to make payments easier and better for clients so you will use their payment credentials.” The next six months should provide a good indication of whether EMV chip cards will really get some traction in the payment process.
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Ryan Lahti is the founder and managing principal of OrgLeader, LLC. Stay up to date on Ryan’s STEM-based organization tweets here: @ryanlahti
(Photo: Chip-Enabled Charles Schwab Visa Card, Flickr)