It's almost showtime for EMV, at least in terms of the October fraud liability shift deadline meant to spur chip card implementation. However, large numbers of consumers, retailers and financial institutions are not ready.
Reflecting the lack of readiness by credit card issuers and their customers, research reported this week showed that of existing cardholders, 59 percent have not yet received their chip-enabled credit or debit cards, according to ACI Worldwide's EMV Readiness Survey. The study also said that 67 percent had not even received information from their card-issuing financial institution explaining what EMV means and how it will impact them.
|Image courtesy of ACI Worldwide|
Of those who have received the chip cards, only 32 percent were aware of the transition to EMV, with the majority not knowing the reason they received a new card.
Multiple studies have shown that many retailers will not be ready for the transition, especially smaller merchants. For example, a study by Lightspeed POS said that only 18 percent of U.S. retailers had implemented EMV payment technology by April of this year, and 45 percent would miss the October deadline. Of the retailers who have not yet implemented the technology, 25 percent said they do not understand the new rules, 17 percent have never heard of EMV, and 18 percent do not want the trouble or cost of changing payments hardware.
"Implementation looks to be a significant hurdle as retailers approach the October 2015 deadline," Dax Dasilva, founder and CEO of Lightspeed POS, told FierceRetailIT. For an independent retailer now responsible for fraudulent credit card activity, "not being EMV ready is no small problem," considering the cost of a bicycle or piece of jewelry, he said.
"To ensure ROI and achieve readiness, merchants must consider their path carefully. As mobile payments rise in popularity, retailers will need terminals that support both chip-and-PIN and NFC technology. It may be more efficient and cost effective to upgrade both at once," Dasilva said.
As for the equipment needed, older payment terminals only accept magnetic swipe payment cards, but now retailers need a terminal that supports chip cards. "With these terminals, customers insert their card in the terminal for the duration of the transaction, rather than swipe it through quickly," he said.
Contactless card technology is also coming, and in some cases, customers can simply "tap" their card on a terminal for automatic payment. Sometimes, these cards also come with a PIN number for even more protection, similar to debit cards. "While PINs have not yet been distributed in the U.S., retailers should prepare for this now, making sure they also have a PIN pad ready," he said.
Some retailers will receive new hardware from their POS or payment providers, but others will have to purchase the transaction equipment. "Retailers should consider getting an EMV payment terminal that integrates with their POS system to ensure that the credit card terminal, the payment processor, and the point-of-sale software sync in real time, avoiding inaccuracies and the need for manual entry later," Dasilva said.
The bank also plays a role here, as the customers must have a chip card to use the new system. If the retailer is EMV-ready but the customer does not have a chip card, the bank is liable for any fraudulent charges that may result.
At the same time retailers are investing in technology to accept the chip cards, new payment options are becoming available that enable shoppers to forget about cards altogether. "Contactless payments like Apple Pay and Samsung Pay use Near Field Communications (NFC) to pass data over radio waves from the customer's phone to the payment terminal. As mobile payments become more popular with customers, retailers should consider investing in a terminal that accepts both chip cards and mobile payments," Dalsilva said.
Shoppers will also require education about the new payments options. "They may ask your staff how to use them, so prepare cashiers to walk customers through the process. You may want to provide them with an outline of the steps so they feel comfortable," he said.
"Employees will need to be trained on how to use chip cards as well as how to use each form of mobile payment to ensure all transactions can be made smoothly."
Customers may even be alarmed at the change if they are unaware of the reasons for it. "Train staff to respond in a way that reassures the customer that the new process is in their best interest and is actually a more secure form of payment, instituted by the credit card companies, to better protect retailers and consumers from fraudulent charges," Dasilva said.
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