BROOKFIELD, Wis.—It’s deadline day, the day many consumers will begin learning what it means to “dip” their plastic cards, rather than swipe them.
After years of planning, discussion, debate, legal action, finger-pointing and more, Oct. 1 officially marks what has often been called the “EMV deadline” but is really about the effective date of the liability shift in the event of card breaches.
Beginning today the major card associations have said that any party that has made the investment in EMV, or chip card, deployment is protected from financial liability for card-present counterfeit fraud losses on this date.
The risk from card-not-present transactions will continue to be an issue.
One payments expert with a great deal of experience with EMV across the globe, gives the U.S. a good grade on its migration to chip cards as the liability shift deadline arrives.
Leaning on his own personal knowledge of the U.S. progress, and a June survey Fiserv conducted with 1,500 U.S. consumers, Jamie Topolski, director of alternative payment strategies at Fiserv, gave the U.S. a “solid B.”
Many Merchants Not Ready
But while most financial institutions, including credit unions, have begun the reissuance process or already re-issued chip cards to their customers/members, the other half of the transaction is another story. Many merchants, especially the so-called small “mom and pop” stores, have yet to invest in readers that are compatible with EMV chip cards.
As CUToday.info reported here, a significant number of U.S. retailers do not have a POS system in place that is compliant with the EMV payment standard, including a “surprising” finding that many retailers believe it’s all unnecessary, according to a report from Austin, Texas-based Software
The new research found that 64% of single-store retailers don’t have a POS system in place to handle chip cards.
The Smart Card Alliance, meanwhile, said it found that 23% of retailers believe the EMV readers are unnecessary.
Analysis released by Aite Group has suggested it will likely be a minimum two-year transition before EMV is fully implemented in the U.S. Until then it will be a mixed POS environment in the U.S., which could lead to some confusion among consumers.
The Migration Well Under Way
Nevertheless, all of the big credit union issuers and payments associations report that most of their member CUs have begun the migration process. The Members Group in Des Moines, Iowa, for instance, reported that 98% of its credit-issuing clients have completed or initiated EMV migration, and that 25% of the credit and debit cards in TMG’s portfolio are chip-enabled. Many of its member CUs are reissuing on the natural expiration of their mag stripe cards (see story, above, right).
“What has been impressive is the collaboration within the industry to make this happen,” said Fiserv’s Topolski. “The EMV Migration Forum has worked to bring together issuers, merchants and the payments networks to figure out how we are going to do this. And you saw organizations at these meetings—some that you typically would not associate with constructive collaboration—working through challenging issues to come up with solutions.”
According to the Fiserv study, the number of credit and debit card consumers that have received an EMV card has increased substantially over 2014. Approximately, 38% of credit card consumers received an EMV card, which is up from an estimated 13% in the first half of 2014. Also, 19% of debit card consumers have received an EMV card today, compared to approximately 9% in the first half of 2014.
“These numbers are even ahead of where we thought they might be,” said Topolski.
Consumer Awareness Rises, But...
Consumer awareness of EMV cards has risen dramatically in one year as EMV cards have become more prevalent, the report shows, although a significant number remain unaware of what’s involved. Today, 62% of consumers have heard of an EMV card; for another 23%, the term sounds familiar. In contrast, in the first half of 2014, only 31% of consumers had heard of an EMV or chip card. The percent stating that it sounds familiar was nearly the same at 25%.
Topolski acknowledged that he wished consumers could be further along in their EMV understanding and awareness. “But we are seeing a marked increase, which I believe is being driven by consumers using their EMV cards at retailers like Walmart, Home Depot and Target. Plus, when cardholders are issued a chip card now, it almost always comes with educational materials—something that did not always happen a while ago.”
The report also found that for many consumers who have chip cards, it is the preferred payment card in their wallet. Thirty percent of EMV debit or credit card holders stated they use the EMV card more versus only 15% stating they use it less. Millennials are more likely to use the EMV card more than other cards in their wallet versus Baby Boomers, the report shows.
“This has a lot to do with the added security from the chip,” said Topolski. “Consumers know the card is more secure so they use it more.”
But confusion over the benefits of an EMV card persists. Twenty-nine percent of consumers that are familiar with the term EMV did not know what the benefits were. Another 8% confused an EMV cards with a prepaid card.
“This implies that a lack of understanding EMV benefits is even higher in the broader general population,” said Topolski.