Ask us to describe the state of EMV migration at this moment, and we would have to call it a mixed bag of good and not-so-good.
On the positive side, certification of point-of-sale (POS) hardware and software to comply with the EMV payment technology standard, while slow to occur, is proceeding at a steady rate. Earlier this month, Visa released a statement stipulating that the ranks of “chip-enabled” merchants tripled in size in the second half of 2015 and now number 766,000, representing an increase of 872 percent in the last year. The volume of chip-based transactions in the U.S. rose by more than 30 percent in December of last year, to $15.8 billion from $12.1 billion the previous month, and seven out of 10 Americans now have at least one chip in their wallet.
Equally encouraging, at least one often-discussed obstacle to EMV acceptance is being scaled. That obstacle is the speed of EMV transactions—or, shall we say, concern about the slower pace of EMV transactions, which simply can’t be processed as quickly as their magnetic stripe-based counterparts. Admittedly, some merchants, especially the larger ones, have been reluctant to educate consumers about how to use their chip-enabled cards at the POS; their modus operandi, spurred by a perception that EMV simply slows down lines, was to wait until customers learned at other retailers’ checkout counters to get the job done fast. However, a larger cadre of retailers has been actively engaging in employee and consumer training to minimize EMV transaction speed-related concerns and keep lines moving—in turn kicking adoption up a notch.
On a less positive note, however, there are still repercussions from the EMV certification process followed by independent software vendors (ISVs). This process is extremely complex and has many “layers,” keeping ISVs well behind schedule in releasing new versions of their offerings.
Many integrated POS systems were also not ready to “go” in time for the October 1, 2015 EMV liability shift date—even if the availability of appropriate software wasn’t even an issue. And in the restaurant industry, the work needed to grapple with tips and tip adjustments in otherwise EMV-compliant restaurant POS software just hasn’t been, and to a degree, still isn’t proceeding as it should be.
Then, we can’t forget about the chargeback problem. Among tidbits from a recent webinar hosted by Heartland Payment Systems and the National Restaurant Association is this one: Many small business owners are being hit with more chargebacks since the EMV liability shift than they had initially expected. We can’t say we’re very surprised about such a trend; after all, fraudsters are shifting their attention away from merchants whose POS equipment can accommodate chip-enabled cards (and hence, thwarts their efforts) and toward those whose equipment is mired in easy-to-duplicate magnetic stripes.
As Heartland and the NRA see it, the “tidal wave of chargebacks” is hitting all types of markets and in all states, but players in a few specific merchant categories and regions are bearing the brunt of the trend. Petroleum/inside sales, restaurants and bars, and quick-service/vending establishments top the list of hardest-hit merchant categories. Breaking things down by region, chargebacks are especially common in Texas, New York, California, Florida, Illinois, and New Jersey, as well as in large cities/populated areas, and college towns; border areas; and markets in which use of “foreign cards” is heavy.
Will chargebacks occur less frequently as merchants board the EMV train? We think so. Will ISVs finally catch up, and will retailers take a more proactive stance in getting customers accustomed to chip card use? Yes again. But still—and despite all the positives—it will take time for all of the pieces to fall into place. We’ll wait.