Card issuers ramp up for EMV, retailers lag

Support is growing for chip cards based on the global EMV standard, although there is concern that many retailers will miss the October implementation deadline, according to credit card industry executives and researchers.

EMV is secure, provides a superior user experience and can protect merchants from fraud liability, said James Anderson, senior VP, mobile, MasterCard, speaking at last week's Smart Card Alliance 2015 Payments Summit in Salt Lake City.

"We really are on the road to EMV everywhere," he said.

EMV stands for Europay, MasterCard and Visa. It is a standard for inter-operation of integrated circuit cards (IC cards or chip cards), and IC-card-capable point-of-sale terminals and automated teller machines. It authenticates credit and debit card transactions.

Merchants are working hard to meet the October 2015 deadline for migration to EMV cards, Patty Walters, senior VP of merchant products and security at Vantiv, said at the meeting. She pointed out that it was only in the last year that merchants had adequate specifications for developing and certifying EMV debit point-of-sale applications. Vantiv completed successful pilots of the U.S. common debit application identifier in Richmond, Virginia, and Bellingham, Washington, in the fall of 2014, she said.

The consensus forecast is that 47 percent of merchants will be ready to accept chip cards by the end of 2015, said Kimberly Lawrence, senior VP, global corporate initiatives, Visa. There are currently 78,800 EMV chip activated merchant locations, she said.

However, three years after card issuers announced the EMV initiative, 34 percent of merchants interviewed by the Aite Group for a research report had never heard of it, according to an article in PaymentsSource. The report also showed that, of the 400 merchants surveyed, 46 percent had not begun preparing for EMV. A retailer missing the October deadline may face changes in fraud liability, PaymentsSource reported.

A report summary issued by Aite Group said 70 percent of U.S. credit cards and 41 percent of U.S. debit cards will be EMV enabled by the end of 2015.

The majority of card issuers are initially issuing contact-chip rather than dual-interface cards, Aite Group found. The drivers of this decision are cost, a desire to keep the initial deployment as simple as possible, and a belief that the merchant infrastructure will not yet be ready to support contactless transactions in any great scale by the liability shift date, the researchers wrote.

"Taking the world's largest card market from mag stripe to EMV is a massive undertaking," said Julie Conroy, research director in retail banking, in the summary. "The 17 months before the liability shift takes effect will pass by quickly, though, and issuers, based on lessons learned from other countries, should consider issues like fraud migration paths and how to counter them, as well as how to educate the consumer and merchant alike on chip cards. They should also consider using third-party expertise, already deployed in the EMV migration of other countries, to streamline the implementation process and help with the knowledge transfer."

A study from Boston Retail Partners reported that 650 percent more retailers will support EMV by October of this year out of concern for data breaches and fraud. The POS/Customer Engagement Benchmarking Survey found that 63 percent of retailers surveyed said payment security was their top priority for 2015 with encryption and tokenization major topics of discussion.

However, "due to the backlog of retailers upgrading their payment terminals and the effort and timing involved in the bank certification testing, we expect there will be more than a few retailers who do not get EMV implemented within the designated timeframe," the report stated.

For more:
-See EMV Connection, a Smart Card Alliance website
-See this PaymentsSource article
-See this Aite Group report
-See this Boston Retail Partners report

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