Innovations and Payment Systems

The big chip card switch: living with EMV


The transition was slow and bumpy; ATM changes come next

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



October 2018 will mark the three-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 so far, 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, you’re in the minority
More than half of consumer credit cards have been issued with smart chips (85 percent according to CPI Card Group), but not all U.S. payment cards are EMV-ready. Debit chip cards have rolled out at a slower pace, and today, about 60 percent are EMV-ready, 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.

More stores now accept chip cards
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. But that was more than a year ago, and consumers can now expect to dip more than swipe.

Per Visa, 50 percent of U.S. stores now accept chip cards, as of June 2017. Back in October 2016, Mastercard tallied 2.3 million chip-active merchants, or approximately 38 percent of all U.S. merchant locations.

“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: \u2018Oh 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
In 2015, 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.

“Consumers need to realize the amount of fraud that existed with the older magnetic stripe technology was beginning to impact everyone and making payments more inconvenient,” Vanderhoof said. “So this changeover is really 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.

When comparing March 2016 to March 2017, Visa saw a 58 percent decline in counterfeit fraud year-over-year, according to its latest EMV migration figures. Mastercard saw 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 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 speed up
In 2015, reports of checkout lane slowdowns due to sluggish EMV chip card transactions that 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.

“I think a lot of merchants who implemented EMV in the fall of 2015 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 have also worked on speeding things up. In April 2016, Visa introduced Quick Chip technology and when 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 are fading away
Remember being loudly “beeped” at when you first used a new EMV terminal at a store? Good news: EMV terminal transaction noises are getting quieter.

The reason behind the noise was to help consumers adapt to the new technology in the beginning. Oxman said that the beeping was “a transitional measure that’s a response to our collective human muscle memory” “We aren’t used to putting a card in and leaving it for a few seconds and then pulling it back out.” To avoid instances where consumers accidentally left their cards in machines, Oxman said, that loud beeping noise was designed to remind people to pull their card out.

Want to learn more about the recent gas station EMV liability shift change? Read “Gas stations get 3-year extension on EMV transition.”

The next EMV migration wave will deter ATM card skimming
In April 2016, FICO reported a 546 percent increase in ATM skimming attacks from 2014 to 2015. Gas stations saw a sharp rise in card skimming fraud activity in 2016.

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 ATM liability shift to 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.

And a few years later, thanks to a recent liability shift extension granted by Visa and Mastercard, self-service gas stations will have until October 1, 2020 to become EMV-compliant.

The transition to EMV is not over
If you think the EMV adoption process – and news about it – will wrap up soon, we’re still a few years away from that.

“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.

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  >>

See related: We’ll reach chip card saturation in 2020, Video: Protect your identity in ways chip cards can’t, Gas stations get 3-year extension on EMV transition

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