The big chip card switch: a year of living with EMV

The transition was slow and bumpy; changes at ATMs, gas stations come next


One year of EMV: Consumer update iamporpla/iStock/Getty Images Plus/Getty Images


One year of EMV: Consumer update iamporpla/iStock/Getty Images Plus/Getty Images


October 2016 marks the one-year anniversary when consumers were officially introduced to EMV, the smart-chip based payment technology taking over the U.S. payment ecosystem.

To measure just how successful (or not) the EMV shift has been, spoke with a handful of payment industry leaders to find out. Here’s what they had to say:

If your wallet doesn’t have a chip card yet, it will shortly
More than half of consumer credit cards have been issued with smart chips (65 percent according to CPI Card Group, or as high as 88 percent, according to MasterCard), but not all U.S. payment cards are EMV-ready. Debit cards, in particular, are lagging behind, as only about 33 percent have chips on them today, according to CPI Card Group.

“The credit card market is concentrated among a much smaller group of players than debit cards, which are widely distributed over nearly all financial institutions, so it stands to reason that different institutions are going to have different strategies for implementation,” said Doug Johnson, senior vice president of payments and cybersecurity policy for the American Bankers Association. “If they haven’t received one yet, they’ll have it soon.”

Most issuers focused on reissuing credit cards used most often first, typically high-limit international business or travel cards. Also, many issuers have been replacing cards when the card expires,” said Stephanie Ericksen, vice president of global risk products at Visa.

You’ll be able to use your chip cards at more stores in 2017
Currently, there are three groups of retailers: Those who have migrated to EMV, those who are in the process of doing so and those who have chosen not to. As a result, consumer experiences have been mixed. In fact, a March 2016 survey found “not enough stores accept smart chip cards” was one of consumers’ top complaints about EMV.

Today, only about 29 percent of merchants are EMV-ready, according to The Strawhecker Group. Payment network estimates are similar. Visa announced 32 percent of U.S. stores now accept chip cards in September. As of July 2016, MasterCard tallied 2 million chip-active merchants, or approximately 33 percent of all U.S. merchant locations.

How EMV chips are made
Microcomputers on your credit cards

A look behind the scenes at an ultra-secure credit card factory where small but complex smart card chips are made.

See more  >>

 “In some places, merchants have bought the equipment and they’ve installed the equipment, but the credit card companies have not certified the equipment,” explained Mallory Duncan, senior vice president and general counsel at the National Retail Federation. “So even though the chip card reader is sitting there, they aren’t allowed to turn the reader on to process chip card payments. Instead there’s a sign saying ’chip reader not operating’ or something like that.”

To be certified, each card network (Visa, MasterCard, American Express and Discover) has to approve a merchant’s EMV payment system, a process that can take several months. And, since there are multiple card networks, merchants need to wait until all accepted networks approve their EMV upgrades.  

“Imagine this scenario from a cashier’s perspective: ‘Oh you’ve got that card? Stick it in! No wait, not that one, you’ve got to swipe that one!’” Duncan said.  “Talk about confusing. Merchants have to get certified across the board before using the terminal.”

There are also merchants that have decided not to migrate to EMV due to high costs or lack of need, a choice they have under the merchant liability guidelines.

For shoppers, this means a mix of EMV register experiences will continue, for now. According to Aite Group, 84 percent of non-chip-ready merchants report they are planning to upgrade or are already doing so.

“In the next 12 months, you’ll start to see retail locations that are still relying on card swipes and the mag stripes make that conversion to chip,” said Randy Vanderhoof, executive director of the Smart Card Alliance.

For a primer on EMV chips cards – what they are, how they work – see “8 FAQs about EMV credit cards.”

Chip cards do reduce counterfeit card fraud
Counterfeit card fraud costs in the U.S. accounted for 48.2 percent ($7.86 billion) of gross card fraud losses worldwide, according to The Nilson Report. In particular, card issuers lost $4.91 billion and merchants lost $2.95 billion to counterfeit card fraud in 2015.

“Consumers need to realize the amount of fraud that was existing with the older magnetic stripe technology was beginning to impact everyone and making payments more inconvenient,” Vanderhoof said. “So this changeover is really a necessary in order to bring security back to the payment system.”

While EMV migration is far from complete, early payment network data shows counterfeit fraud may already be slowing down.

“From May 2015 to May 2016, we saw a 47 percent decrease in counterfeit fraud at the merchants who have moved to EMV,” Visa’s Ericksen said. MasterCard has seen a 54 percent decrease in counterfeit card costs among its merchants from April 2015 to April 2016. On the flip side, “Among merchants who have not moved to EMV or are in the early stages of doing so, we’ve seen a 77 percent increase in counterfeit card fraud year-over-year,” said Chiro Aikat, senior vice president of product delivery (EMV) at MasterCard.

Your chip card’s mag stripe is protected by the chip
“The reason why cards still have mag stripes is because we want to be able to ensure that when consumers shop, they’ll still be able to transact with their cards even if the bank has not upgrade their card or the merchant where they are shopping at has not upgraded their equipment,” Vanderhoof explained.

While traditional mag stripe cards are easily counterfeited, a counterfeit chip will be useless at EMV-ready retailers.

“Your card is smart,” explained Jason Oxman, chief executive officer of the Electronic Transactions Association. “Your chip card, even though it has a mag stripe on it, knows it’s a chip card. So if it’s swiped card at a terminal that accepts chip cards, it will give an error message and prompt the holder to insert the card instead. But fraudsters won’t have the chip to do that.”

Once chip card technology is adopted universally, mag stripes will fade away, but for now, they remain. 

With a prod from banks, EMV-ready ATMs are coming. See “ATMs changing to accept EMV chip cards.”

EMV transactions are getting faster
In 2015, reports of checkout lane slowdowns due to the slowness of EMV chip card transactions arose during the busy holiday shopping season. In fact, chip card transaction times averaged around 12 to 15 seconds, according to Henry Helgeson, CEO of Cayan, a Boston-based merchant technology company. A year later, consumers should soon be experiencing easier, quicker transactions.

“This holiday shopping season there will be fewer people seeing a chip card transaction for the first time,” Vanderhoof explained.

“I think a lot of merchants who implemented EMV last fall were part of the first round of EMV adoption and have all been working on optimizing and fine-tuning the checkout experience themselves, so whether or not they have moved to quick chip, many of them have already tried to speed up the transactions at their checkouts,” said Visa’s Ericksen.

The payment networks are working to speed things up. In April 2016, Visa introduced Quick Chip technology and if implemented by a merchant, a consumer can insert a chip card and remove it about 2.5 seconds later. MasterCard’s “M/Chip Fast” is very similar, according to MasterCard’s Aikat, as card processing time under Chip Fast is less than 2.5 seconds.

Obnoxious terminal beeping noises will fade away
Tired of being “beeped” at when the cashier terminal wants you to remove your chip card? Good news: EMV terminal transaction noises will get quieter over time.

This is a transitional measure that’s a response to our collective human muscle memory,” Oxman said. “We aren’t used to putting a card in and leaving it for a few seconds and then pulling it back out. In order to avoid instances where consumers accidentally leave their cards in machines, that loud beeping noise is designed to remind people to pull their card out.”

Once everyone is used to dipping chip cards and retailer acceptance of EMV is ubiquitous, the loud noise won’t be necessary anymore.

Need information about migrating to EMV? Read “7 merchant tips to understanding EMV fraud liability shift.”

The next EMV migration wave will deter ATM card skimming
In April, FICO reported a 546 percent increase in ATM skimming attacks from 2014 to 2015. Gas stations have also seen a sharp rise in card skimming fraud activity this year.

Oct. 1, 2016, marked the next liability shift date in the EMV migration process, this one for MasterCard-branded ATMs. Because of how smart chips secure card information, upgrading ATMs to EMV standards means fraudsters will have a harder time skimming cards. Visa scheduled its liability shift on Oct. 1, 2017.

“Look for ATMs that have upgraded to chip capability,” Oxman advises. Also, “If you use an older ATM, first look to see if it has been tampered with or modified in any way because that’s something to be concerned about.” If an ATM seems questionable, don’t use it.

Not long after that, consumers will see EMV chip card readers at gas stations, too. "We're going to see a big migration push on the part of the service stations over the next year because they have an October 2017 liability shift deadline," Duncan said.

The transition to EMV is not over
If you think the EMV adoption process – and news about it – will wrap up soon, think again. 

 “It’s still a process, not an event, so it takes time,” Ericksen said. “It will take a few years after a liability shift to get to about two-thirds of the payment volume in a country to be chip-on-chip, a chip card in a chip terminal.”

While the migration process comes with learning curves, adjustment periods and even annoyances for all those involved, the adoption of chip cards should be good for consumers in the end.It's really a long-term plan, so consumers will have less concern about having their cards compromised and will be more confident using them everywhere without the worry they’ve had in the past,” said Vanderhoof.

See related: We'll reach chip card saturation in 2020, Video: Protect your identity in ways chip cards can't

Published: September 30, 2016

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Updated: 10-22-2016

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