EMV, which stands for EuroPay, MasterCard, and Visa, is a technology that uses an embedded chip to increase card security for the retail card-present transaction. And all across Canada and the United States, its use is on the increase, reducing card fraud and improving consumer trust in the card companies.
The U.S. is 25 years behind in EMV tech
In the United States, only around 29 percent of retailers are currently able to accept EMV-enabled cards since the 2015 Liability Shift. Although the technology has been around since the 1990s, it was not fully adopted in the U.S. until October 1, 2015. This was the date when liability for credit card fraud was shifted onto the retailers, as a way of forcing merchants to adopt the EMV-enabled point-of-sale (POS) terminals.
EMV works by storing the information in a chip that cannot be read except by a registered terminal linked to the issuing bank’s payment system. The older magnetic strip cards stored that information in a magnetic strip on the back of the card, that could easily be read and transferred to a “clone” card and be used with a signature. EMV requires a PIN to authorize the payment, which means it is more secure than magnetic strips.
Official certification slows the adoption process
2016 was the first transition year for the U.S. adoption of EMV technology, and with more than a full year having passed, penetration has not exactly gone as expected. The low adoption of EMV-enabled terminals was mainly due to a delay in the official certification of the technology by the government. This caused a lot of confusion for both customers and merchants, with a lot of swapping between using the EMV chip and the magnetic strip. In one store you could dip the card in the terminals, while in another you would still need to swipe as before. This also resulted in more chargebacks against the payments, as many merchants were not yet EMV-compliant.
EMV adoption should be complete by 2018
The good news on this front is that the adoption is forecast to hit 98 percent for the United States by the end of 2017. And with the adoption of the EMV-enabled terminals, it paves the way for the next generation of payment solutions; Contactless payments. And while the new technology has caused increased queues in some enabled stores, this should soon disappear as people get more used to dipping their cards instead of swiping at the checkout.
But with the U.S. being so far behind the rest of the western world in terms of payment technology use, it also means that the slow adoption of the EMV technology is slowing down the consumer ability to use contactless payment methods.And it is expected that mobile payments will go beyond just mobile phones by the end of this year. Biometrics and wearables are expected to be perfected by the end of 2017, giving rise to a new breed of payment options for the consumers.
AFD liability requirement postponed
Automated fuel dispensers (AFDs) have been excluded from the EMV requirement until 2020, as a postponement from the expected date of October 1, 2017, was initiated.This is mainly due to the difficulties in retrofitting the AFDs to accept EMV cards. And both MasterCard and Visa will be closely monitoring the situation and help to mitigate any losses due to fraud. But that has not applied to ATM liability, which still applies on October 1, 2017. At this point, all ATM operators should already be making the transition if they want to be EMV-ready in time for the liability shift.
Canada shows how important EMV adoption really is
In Canada, however, it is a very different story. With EMV adoption having started in 2008, in the present day it is hard to find a store that still uses magnetic strip technology. And while EMV normally only requires you to enter your PIN, in Canada, the terminals require you to sign the receipt before the card is returned to you. And the overall adoption shows that EMV can dramatically reduce card-present transaction fraud. In 2008 card present fraud totaled more than 266 million dollars. In 2016, that amount had dropped to just 67 million dollars. The drop in fraud is directly related to the adoption of EMV-enabled cards and terminals. EMV is almost impossible for criminals to duplicate, meaning it is more secure during the transaction. EMV chip cards have proven to reduce card present fraud in multiple countries.
Merchants were ready before the card issuers
It has taken Canada 8 years to get to this stage, and it was always expected to take several years to upgrade all the technology. Different card issuers had their own timelines for updating their customer’s cards, and a lot of it depended on the then card’s expiry date. But with the cost of upgrading the terminals being only around 200 dollars, it took the retailers less than a single year to update to the new EMV-enabled payment processing terminals.
EMV is definitely here to stay, despite the recent advances in mobile payment solutions, and the expected increase in biometric and wearables use. The security it offers is a major part of improving customer experience, which can only ever be good for business. And for those who are procrastinating about updating to EMV, be prepared for the consequence of being held liable for any card present fraud that could result in chargebacks.
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