Despite being around since the 1990's, consumers and merchants didn't really have to deal with EMV cards until 2015.
Short for Europay, MasterCard, and Visa, EMV technology uses a chip that's embedded in a credit or debit card, as opposed to storing information on a magnetic strip. The idea behind this is that inserting your card is more secure than swiping it. The technology had been in place in most developed nations for years, but it yet didn't arrive in the States until it was adopted on October 1, 2015 because of the EMV Liability Shift.
Since we've recently passed the first full year of EMV adoption in America, what can we expect to see in 2017?
2016 was just a transition year.
You should consider 2016 as a transition period for the adoption of EMV cards. And, as with any transitional period, there were both highs and lows for merchants and consumers. For customers, the most obvious complaint were longer wait lines. But, over the next year, customers will become used to "dipping" their cards when they go to checkout. However, expect to see new payment options that will speed up the checkout process.
For retailers, only 29 percent of merchants were able to actually accept chip cards because there was a delay in waiting for official certification. This wasn't just confusing since it forced customers to switch back and forth between 'swiping' and 'dipping,' it also resulted in more charge chargebacks since the merchant wasn't EMV compliant. "The good news is that as merchants refresh their terminals for EMV, they are also adopting the contactless capability which lays down the foundation for future payments such as mobile proximity payments," says Ared Drieling, business intelligence manager at TSG.
And, since we expect to see the shift to EMV to reach 98% by the end of the year, those highs and lows that were experienced should be resolved.
EMV wait lines will get better.
As I previously mentioned, the biggest grip that customers have with EMV are the wait lines. In fact, consumers spent 5 and half hours waiting for EMV. And, that's not exactly ideal fir businesses and customers.
"There are multiple reasons why a transaction is typically slower in the United States than we observe in elsewhere," says Sherif Samy, managing director, Transaction Security Operations, at UL, in an interview with Banking Exchange. "The first question we need to ask: 'Is that a problem?'"
It depends on the business.
"If you are in a fast-paced, high-volume market, [a slow] speed of transaction will be a detrimental part of it. If you are in a merchant environment and you would like a dialog with the consumer, then it is less critical. We can't generalize EMV speed of transactions. We need to look at it per market segment."
Samy believes that the industry "will see a second release of EMV implementation in the market that is more optimized as experience grows in this market, and companies like UL push for more best practices in the market."
But, there's another unexpected consequence of EMV; the rise of contactless payments because of contactless EMV cards and digital wallets.
It's anticipated that by the end of 2017, 70% of mobile users will use their devices to make a payment. That's because they're fast, convenient, and secure. As technology advances this upcoming year, mobile payments will go beyond your smartphone as biometrics and wearables are perfected.
Fuel-pump EMV liability has been postponed, but ATM liability has not.
Due to the difficulties that gas stations are experiencing with retrofitting fuel pumps to accept EMV chip cards, Visa and MasterCard have postponed the original October 1, 2017, EMV liability shift for U.S. automated fuel dispensers (AFDs) until October 1, 2020.
During this interim period Visa and MasterCard, "will monitor AFD fraud trends closely and work with merchants, acquirers and issuers to help mitigate any potential counterfeit fraud exposure at AFDs. We will also continue to work with fuel merchants, certification vendors and software suppliers to ensure EMV chip migration efforts continue."
However, the EMV liability shift at ATMs will not change and will take effect as planned on October 1, 2017. So, if you're an ATM operator and haven't begun the transition to EMV yet, it may already be too late - which means you may have to consider pulling the plug.
Online and mobile fraud will continue to rise.
While EMV has cut-down on the amount of card-present fraud, there's been an increase in card-not-present fraud. According to Experian, the 2016 e-commerce fraud attack rates appear to be at least 15 percent higher than 2015's total. "This suggests that card-not-present fraud is increasing as e-commerce fraud is often an indicator that other fraud activities have already happened -- a credit card has been stolen, identity fraud has occurred or personal credentials have been compromised."
"Fraudsters continue to exploit new vulnerabilities, and perpetrate card-not-present fraud against businesses using stolen consumer identity and payment data," said Adam Fingersh, Experian general manager and senior vice president of Fraud and Identity Solutions. "This reinforces the need for aggressive fraud prevention strategies and adoption of open technology platforms to prepare for the latest emerging cyber security threats. Fraudsters have what they need to quickly capitalize on compromised data, so businesses need to be prepared."
As EMV adoption continues to spread in 2017, don't be surprised to see an increase in card-not-present fraud, so follow Adam's advice and have a fraud prevention strategy in place, as well as being up-to-date on the latest payment scams.
It's time to adapt.
Don't kid yourself. EMV is here to stay and it will continue to be a focal point in the payments industry - mainly because of how secure it is. If you're a retailer who has been procrastinating in adopting EMV into your current system then you may face long-term consequences like being held liable for counterfeit fraud that could result in chargebacks.