It would be easy to assume that the migration to EMV in the US has gone terribly. The press is full of stories about slow transactions, inconsistent customer experiences and slow merchant adoption. While not living this day to day, I also experienced this frustration first-hand on my trips to the US earlier this year, and wrote about it in a previous blog.
Yet, while the end customer experience clearly must improve, real progress has been made. Back in June, Visa reported “over 300 million chip cards in market and 1.2 million merchant locations”. In August, MasterCard announced that “80% of its US consumer credit cards have chips” and reported seeing “1.7 million chip-active merchant locations on its network, representing nearly 30% of the US merchant population, and a 374% increase in chip terminal adoption since 1 October 2015”.
Of course, these numbers would be far more impressive if the liability shift was happening in October this year rather than last. However, EMV migration doesn’t happen overnight, and in a market as complex and diverse as the US, it was always expected to take many years, especially considering the early reluctance and skepticism of the industry, and additional complications in debit.
Configurations and resources
One of the challenges for merchants is getting their new EMV terminals certified, which can take a long time, especially when there’s a backlog of demand. To alleviate the problem, in June, Visa and MasterCard relaxed terminal certification requirements by reducing the number of tests, giving acquirers more freedom and responsibility in the certification process, allowing standard configurations and providing more resources to value-added resellers (VARs).
Also, recognising that it’s not always the merchants’ fault that they are behind with EMV implementation, both networks introduced measures to minimise chargeback costs to merchants who have not yet transitioned to EMV. For example, MasterCard has “checks and blocks to ensure that chargebacks follow the liability shift guidelines”, such as not allowing chargebacks on fraudulent ATM and fuel transactions, where the liability shift hasn’t yet taken place. Visa has taken a step further, announcing that from 22 July it would would “block all US counterfeit fraud chargebacks under $25”. And from October 2016, “issuers will also be limited to charging back 10 fraudulent counterfeit transactions per account”.
Of course, there is a risk that rather than incentivising merchants to speed up EMV adoption, these changes to the network chargeback policies will reduce the pressure on merchants to migrate. Verifone, one of the largest POS companies, has reported lower revenues for Q316, partly as a result of “lingering EMV adoption issues”, and has stated that its “outlook for Q4 now assumes a significantly slower EMV rollout”. Not surprisingly, Paul Galant, CEO of Verifone, has emphasised the company’s “relentless execution” on “the long-term vision for Verifone to transform from a box shipper to a services provider”.
Nobody is under any illusion that EMV migration in the US will be over any time soon. However, we must recognise that real progress is being made. Changes introduced by the networks, as well as new liability shift dates, such as for MasterCard ATM transactions coming into effect in October this year, should help keep the momentum going. And while consumer adoption of various contactless pays, such as Apple Pay and others, has yet to “set the world on fire”, perhaps they will end up giving another reason for merchants to invest in chip terminals. After all, for the optimists among us, every cloud has a silver lining.
– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Image: Novikov Alex, Shutterstock.com