The deadline for U.S. card-issuers to send out EMV chip cards – and for merchants to accept these cards – was a year ago. And you’ve probably noticed things aren’t perfect yet. Some of the cards in your wallet still may not have a chip, and not all the places you shop take chip cards.
So does that mean the U.S. is behind when it comes to EMV? We asked three experts from different parts of the payments industry whether we’re where they expected us to be at the one-year mark.
Overall industry perspective (Randy Vanderhoof, director of the U.S. Payments Forum)
We’re on track, with some challenges remaining
The U.S. Payments Forum (formerly called the EMV Migration Forum) is a cross-industry collective focused on guiding the many parties involved through EMV implementation. So we asked Vanderhoof for his bird’s-eye-view perspective.
“The U.S. migration to EMV is progressing at an understandable pace, keeping in mind the challenges merchants are facing to accept chip,” he says.
For stores, it’s not as simple as buying an EMV-capable card reader and plunking it on the counter. All those terminals must be certified by the merchant’s acquiring bank or payment processor to make sure everything is working as it should be. And that’s creating a bottleneck. The card networks (Visa, MasterCard, et. al), which dictate these standards simplified their processes a couple months ago, Vanderhoof says, which should speed up the conversion.
Despite the snags, there’s “a lot of great progress to report,” Vanderhoof says. The majority of cards in the market are now chipped, he says, and 1.7 million merchants can accept them.
“With tens of thousands of retailers turning on their chip terminals every week, we expect to see continued progressing the coming year,” he says.
The merchant perspective (David Frick, co-founder and president of Transaction Resources, Inc.)
We’re progressing as expected and — as expected — merchants are frustrated
The merchant side of the payments business is often the untold story in the EMV narrative – and “the stepchild of the industry,” says Frick, whose company provides a variety of payment services for merchants.
And, as the merchant side of the industry predicted just before the deadline, that’s leaving some merchants trapped in a tricky spot at the one-year mark. Giants with practically unlimited resources, like Wal-Mart, were predictably able to comply in advance of the October 2015 deadline. And small merchants needing just one terminal are “happy as can be” with the ease of upgrading, according to Frick.
“But the merchants in between are the ones struggling,” Frick says.
These are the small-and medium-sized merchants with more complex and customized payment solutions integrated with third-party services, which provide accounting support, loyalty programs and various other add-ons. These service providers connect to the merchant’s payment processor (which enables the merchant to accept cards). Problem is, Frick says, these processors didn’t have their EMV specifications published until just months before the October 2015 EMV deadline.
That has left merchants with integrated payment solutions waiting as their service providers scramble to meet the payment processors’ specs. This waiting game can be a costly one because, along with the deadline came a liability shift – merchants who fail to upgrade are being held financially responsible by the card networks if a counterfeit card gets used at their store.
“These merchants aren’t to blame, and that’s why we’re so frustrated,” Frick says. “Why are Visa, MasterCard and the other companies coming down so hard on merchants like that when there’s nothing they can do about it?”
The issuing perspective (Jack Jania, senior vice president, strategic partnerships for Gemalto)
We’re right on target, given complexity of market
Gemalto manufactures cards for the industry, and, from Jania’s perspective, “we’re relatively right on track.”
“We’re well on our way, from an issuing point of view, to hit all of our targets,” Jania says.
Financial institutions started ordering new EMV cards in 2014, well ahead of the deadline, and 185 million EMV cards got issued that year, Jania says. In 2015, that volume increased by more than 200 percent to 577 million cards, Jania says. That’s roughly a card per person in the U.S.
Debit cards have lagged behind, due to the complicated nature of U.S. payment infrastructre, but are catching up.
If it seems like a year should be enough to reach 100 percent issuing compliance (which we haven’t reached yet), compare our migration to Canada’s migration, Jania says. Canada’s population is roughly one-tenth of ours and required a total of 50 million cards to be issued – and their migration took about two-and-a-half years.
“With an ecosystem as complex and large as ours, this doesn’t take place over 12 months,” Jania says.
As EMV’s presence grows in the U.S., Jania predicts dual-interface cards, which allow for both contact EMV (where you insert your card) and contactless EMV (where you tap your card) to grow in popularity. The latter seems speedier to the customer (no more dipping your card and waiting for the beep or buzz) and has implications for things like transit, Jania says – imagine being able to tap your actual credit card when entering and exiting the subway to pay for your ride, instead of having to load up transit card with funds in advance.
“It’s specifically improving the customer experience and expanding the opportunities where you can use your card,” Jania says.