US Progressing in Adopting Chip Cards, but Merchants Lagging in Tech Adoption
The U.S. has made substantial progress in adopting Europay, MasterCard and Visa-standard (EMV) chip technology in credit cards and debit cards since the payments industry shifted liability for fraudulent charges Oct. 1 to merchants not using chip technology, but financial services and consumer protection groups said Tuesday the transition is far from complete. The U.S. is now the largest user of EMV technology globally despite most European countries having a substantial head start in adopting the technology, said White House National Economic Council Policy Adviser Camille Fischer during a Protect My Data event. She credited the White House-led BuySecure initiative, which led to the issuance of 2.5 million EMV-enabled cards linked to government accounts, for driving strong U.S. adoption of the technology. Merchant adoption of EMV-capable terminals “has been a longer process” than anticipated, Fischer said.
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The financial services industry's migration to chip cards has been a “major upgrade,” which has already resulted in the update of half of the 1.2 billion cards held by U.S. consumers to meet the EMV standard, said Electronic Transactions Association Senior Vice President-Government Affairs Scott Talbott. “Most, if not all” U.S. cards will be updated to include chip technology by the end of 2016, he said. Only 37 percent of merchants have upgraded their equipment to handle EMV technology, with larger merchants being the farthest along in adopting the technology, Talbott said. Small and medium-sized businesses are behind in adopting chip technology, with mid-size firms having particular difficulty because they have more equipment than small companies that needs to be certified as complying with the EMV standard but not the resources of larger companies, Talbott said.
Merchants are lagging in adopting chip technology because the certification process to allow them to use chip readers is already backed up, said Merchant Advisory Group Vice President Liz Garner. That backup is “a big problem” given the liability shift that places the burden on merchants that haven't begun using the chip readers, she said. The financial services industry has been helping merchants go through the certification process, “but there are challenges there,” Garner said. Merchants are also “bullish” on the use of PIN numbers in conjunction with chip readers, but have found difficulty adding on PIN functionality because PIN keypads cost additional money on top of the cost of chip readers, she said.
PIN authentication should be universally used in conjunction with chip technology because it is “a low-cost, immediate solution” to reducing credit card fraud, said American Consumer Institute Center for Citizen Research President Steve Pociask. ATMs and debit cards already universally require PIN authentication, but credit cards still don't, in part because the financial services industry has shifted the liability for credit card fraud onto merchants, Pociask said. Although new authentication technologies will overtake PIN “down the road,” PIN use for personal identification remains the best option, he said.