Well, we made it – we’ve survived one whole year since the EMV mandate went into place on October 1, 2015, which placed much of the onus for in-person credit card fraud on the merchants. Over the last 12 months, there have been many merchants who have adopted the chip-embedded card technology – but there have been many more who haven’t. Merchants were supposed to being accepting EMV cards last October, but one year later approximately two-thirds have yet to make the switchover. According to data released by MasterCard in September, only 2 million merchants – or 33 percent – are actively accepting EMV cards, which is an increase from just 1.4 million a few months ago in June. A Visa report states that about 15 percent more merchants have EMV terminals but have not yet activated them, due to delays in certification. This means that the remainder of U.S. merchants are liable for in-persons payment fraud, unlike pre-EMV, when they were just responsible for card-not-present situations, like online and ecommerce sales.
For those who are EMV compliant, the chip cards appear to be working. A MasterCard report shows that fraud costs fell by 54 percent for merchants who are EMV compliant; however, fraud costs rose 77 percent for those who have yet to implement EMV. Some grocery stores sued the credit card companies earlier in 2016 claiming that delays in certification kept them from upgrading to EMV in time for the October 1 deadline, making them responsible for fraud and chargebacks. These stores saw chargeback expenses increase 20-fold, something the stores say wouldn’t have happened if they’d been able to upgrade sooner.
In an attempt to alleviate the merchant liability and reduce the number of chargebacks attributed to non-compliance, Visa and American Express eliminated chargebacks for transactions under $25 over the summer, with AmEx stating that 40 percent of its chargebacks fell into that category. While this is a welcome development, it has many small merchants whose average sales are typically below the new threshold wondering if EMV compliance is worth it for them.
Despite all of this, EMV adoption seems to have slowed down a bit as of late. The Strawhecker Group (TSG), a management consulting company that focuses on the global payments industry, found that while they estimated in January that more than 50 percent of merchants would be EMV compliant by this time, the actual number is quite a bit lower. Like the Visa study mentioned above, TSG’s report shows about one-third of merchants are EMV ready, citing terminal vendor supply and delays in activation and the certification process for the lower numbers. TSG estimates that customers will be able to use their EMV chip cards in 51 percent of U.S. terminals by December of this year.
Next up on the EMV compliance schedule is ATM machines and self-serve fuel dispensers, and it is coming up fast. The first deadline, for MasterCard ATM transactions, is October 1, 2016, and for Visa and self-serve fuel dispensers it’s October 1, 2017. However, unlike last year’s deadline, this is not a mandate, but a mere liability shift – merchants and ATM owners have the option not to do it. But, as with the 2015 EMV mandate, there are consequences very similar to those of merchants who have not certified. Jamie Topolski, director of alternative payment strategies at the Brookfield, Wis.-based core processor Fiserv, stated, “if the ATM owner has gone through the cost of certifying it and it is a magstripe card that has been compromised, then the liability goes to the issuer of that card, the credit union or the bank.” Conversely, when a bank- or credit union-issued EMV chip card is used in an ATM that hasn’t been upgraded, the liability is on the ATM owner in the event of a fraudulent transaction.
As more merchants come into EMV compliance, in-person credit card fraud should continue to decline. It’s not surprising to see card-not-present fraud rise, and banks and card companies are working on ways to help alleviate that, as well. Things such as ecommerce passcodes, fingerprint authentication and other ideas are being tested to see how well they work. Meanwhile, the best thing is for merchants to become EMV compliant as soon as they can, and for consumers to use their chip cards the way they’re meant to be used.