Will EMV Rule the World?

Posted by Joe Musitano on Jul 8, 2015 3:48:59 PM

chargeback liablity shiftHave you received your new credit card yet with the EMV chip in it?  Many issuers have started rolling these out to users, who for the most part, are unaware of what they are.  In the US, EMV knowledge among both merchants and consumers is extremely low, due mainly to the fact that most terminals are not ready to accept EMV.  There are a few reasons for this. First, there has not been enough of a reason for merchants to upgrade terminals to accept EMV cards prior to the October 2015 Chargeback Liability Shift deadline. Second, most of the EMV capable terminals that are already deployed cannot accept EMV cards yet due to the fact that the processors have a huge EMV certification backlog taking place with the terminals and PIN Pad manufacturers, gateways and/or middleware providers... All of which may be necessary to successfully process an EMV transaction. Most of these EMV capable units can receive a remote software update that can turn on EMV acceptance remotely. There are cases, however, in which the hardware will have to be redeployed. This is on a case by case basis and is one of the many questions a merchant should be asking when implementing a new solution.   


EMV Set to Explode in the US

EMV is already largely used in Europe, Canada and China, and the world is bracing for a revolution in credit card transactions when the US embraces the technology. According to an article written by The Members Group, "U.S. EMV Conversion Expected to Drive SmartCard Shipments," the US will be a large driving factor to this worldwide movement:

"Global EMV card shipments are expected to total more than 3 billion by 2019. Although moves by China are driving much of that total, the U.S. is expected to have a great impact on worldwide shipment numbers in the coming years," states TMG.

In the US, however, less than 33% of total cards in use will be EMV chip enabled by the end of 2015, mainly due to the fact that issuers are facing major delays in issuing the cards quickly enough.

But what about merchants and POS terminals being ready to accept these cards? According to Aite Group, by the end of 2015, approximately 59 percent of U.S. point-of-sale locations will be chip-capable:

Awareness of the migration to chip among small to mid-size U.S. retailers has increased with two-thirds of merchants aware of the standard. This is an improvement in a fairly short time frame, but a significant awareness gap still needs to be addressed for the remaining one-third of merchants who are unaware.

While nearly all large U.S. merchants have either begun or completed their conversion to chip-capable terminals, a large percentage of small to midsize U.S. merchants are either undecided or not planning to upgrade their POS infrastructure in the near future. In short, there is a clear and urgent need for aggressive and ongoing education among the small business community.

  • Among those who are aware, 61% have either begun work or have already completed implementation.
  • For those merchants who are aware and planning to upgrade their POS, a fairly large number have begun implementation. And the pace of implementation is accelerating, with 86% expecting to be chip-enabled by the end of 2015.

Why EMV and Why Now?

Security is the number one reason that EMV is being pushed into the US.  The data stored on cards currently never changes, so if a criminal steals it, it’s easy to copy the data and sell or use it. With EMV cards, however, every time a transaction happens, the chip creates a unique code that never gets used again – ever! Hackers could still steal the transaction code, but since it’s unique, using the code repeatedly simply results in the card’s use being denied.

Don't get me wrong... EMV is not enough to guarantee security.  But it will make fraud more difficult. Tokenization and Point to Point Encryption (P2PE) will round out the security concerns with card payments, but EMV is a great and important first step. (read our post "A Discussion on Security: Is EMV Enough?")

Before you get too concerned with EMV and security, it is important to stress here this liability shift will only impact card present transactions.

But why 2015?  And why October 2015? Quite simply: The EMV chargeback liability shift.  By October of 2015, if you do not use EMV, and someone breaches your security and steals your customer data, you will be responsible for any purchases made with that stolen data.  If you accept EMV, you are not liable. This is called a chargeback liability shift --- from the issuing banks to the merchant. And it all adds up to one incredible and compelling argument why EMV will rule the card payment industry world.

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Topics: EMV