The big chip card switch: a year of living with EMV


The transition was slow and bumpy; changes at ATMs, gas stations come next

By Sienna Kossman

iamporpla/iStock/Getty Images Plus/Getty Images


One year of EMV: Consumer update
iamporpla/iStock/Getty Images Plus/Getty Images


October 2016 marked the one-year anniversary
when consumers were officially introduced to EMV, the smart-chip based payment
technology taking over the U.S. payment ecosystem.

To measure just how successful (or not)
the EMV shift has been, spoke with a handful of payment
industry leaders to find out. Here’s what they had to say:

your wallet doesn’t have a chip card yet, it will shortly

than half of consumer credit cards have been issued with smart chips (77 percent
according to CPI Card Group), but not all U.S. payment cards are EMV-ready.
Debit cards, in particular, are lagging behind, as only about 38 percent have
chips on them today, according to CPI Card Group.

credit card market is concentrated among a much smaller group of players than
debit cards, which are widely distributed over nearly all financial
institutions, so it stands to reason that different institutions are going to
have different strategies for implementation,” said Doug Johnson, senior vice
president of payments and cybersecurity policy for the American Bankers
Association. “If they haven’t received one yet, they’ll have it soon.”

issuers focused on
reissuing credit cards used most often
first, typically high-limit
international business or travel cards. Also, many issuers have been replacing
cards when the card expires,” said Stephanie Ericksen, vice president of global
risk products at Visa.

be able to use your chip cards at more stores in 2017
there are three groups of retailers: Those who have migrated to EMV, those who
are in the process of doing so and those who have chosen not to. As a result,
consumer experiences have been mixed. In fact, a March 2016 survey
found “not enough stores accept smart chip cards” was
one of consumers’ top complaints about EMV.

Per Visa, 37 percent of U.S. stores
now accept chip cards, as of Oct. 31, 2016 As of October 2016, Mastercard
tallied 2.3 million chip-active merchants, or approximately 38 percent of all
U.S. merchant locations.

How EMV chips are made
Microcomputers on your credit cards

A look behind the scenes at an ultra-secure credit card factory where small but complex smart card chips are made.

See more  >>

some places, merchants have bought the equipment and they’ve installed the
equipment, but the credit card companies have not certified the equipment,”
explained Mallory Duncan, senior vice president and general counsel at the
National Retail Federation. “So even though the chip card reader is sitting
there, they aren’t allowed to turn the reader on to process chip card payments.
Instead there’s a sign saying ’chip reader not operating’ or something like

To be certified, each card network (Visa,
Mastercard, American Express and Discover) has to approve a merchant’s EMV
payment system, a process that can take several months. And, since there are multiple
card networks, merchants need to wait until all accepted networks approve their
EMV upgrades.  

“Imagine this scenario from a cashier’s
perspective: ‘Oh you’ve got that card? Stick it in! No wait, not that one,
you’ve got to swipe that one!’” Duncan said.  “Talk about confusing. Merchants have to get
certified across the board before using the terminal.”

There are also merchants that
have decided not to migrate to EMV due to high costs or lack of need, a choice
they have under the merchant liability guidelines.

For shoppers, this means a mix of EMV register
experiences will continue, for now. According to Aite Group, 84 percent of
non-chip-ready merchants report they are planning to upgrade or are already doing

“In the next 12 months, you’ll start to
see retail locations that are still relying on card swipes and the mag stripes make
that conversion to chip,” said Randy Vanderhoof, executive director of the
Smart Card Alliance.

cards do reduce counterfeit card fraud
card fraud costs in the U.S. accounted for 48.2 percent ($7.86 billion) of
gross card fraud losses worldwide, according to The
Nilson Report
In particular, card issuers lost $4.91 billion and merchants lost $2.95 billion
to counterfeit card fraud in 2015.

“Consumers need to realize the amount of
fraud that was existing with the older magnetic stripe technology was beginning
to impact everyone and making payments more inconvenient,” Vanderhoof said. “So
this changeover is really a necessary in order to bring security back to the
payment system.”

While EMV migration is far from complete,
early payment network data shows counterfeit fraud may already be slowing down.

When comparing October 2015 to
October 2016, Visa has seen a 43 percent decline in counterfeit fraud over the
past year, according to its
latest EMV migration figures
. Mastercard saw a 54 percent decrease in
counterfeit card costs among its merchants from April 2015 to April 2016. On
the flip side, “Among merchants who have not moved to EMV or are in the early
stages of doing so, we’ve seen a 77 percent increase
in counterfeit card fraud year-over-year,” said Chiro Aikat, senior vice
president of product delivery (EMV) at Mastercard.

chip card’s mag stripe is protected by the chip
reason why cards still have mag stripes is because we want to be able to ensure
that when consumers shop, they’ll still be able to transact with their cards
even if the bank has not upgrade their card or the merchant where they are
shopping at has not upgraded their equipment,” Vanderhoof explained.

While traditional mag stripe cards are
easily counterfeited, a counterfeit chip will be useless at EMV-ready

“Your card is smart,” explained Jason
Oxman, chief executive officer of the Electronic Transactions Association. “Your
chip card, even though it has a mag stripe on it, knows it’s a chip card. So if
it’s swiped card at a terminal that accepts chip cards, it will give an error
message and prompt the holder to insert the card instead. But fraudsters won’t
have the chip to do that.”

Once chip card technology is adopted universally,
mag stripes will
fade away
but for now, they remain. 

transactions are getting faster

In 2015, reports of checkout lane slowdowns due to the
slowness of EMV chip card transactions arose during the busy holiday shopping
season. In fact, chip card transaction times averaged around 12 to 15 seconds,
according to Henry Helgeson, CEO of Cayan, a Boston-based merchant technology
company. A year later, consumers should soon be experiencing easier, quicker

“I think a lot of merchants who
implemented EMV in the fall of 2015 were part of the first round of EMV adoption and have
all been working on optimizing and fine-tuning the checkout experience
themselves, so whether or not they have moved to quick chip, many of them have
already tried to speed up the transactions at their checkouts,” said Visa’s

The payment networks are working to speed
things up. In April 2016, Visa introduced
Quick Chip technology

and if implemented by a merchant, a consumer can insert a chip card and remove it
about 2.5 seconds later. Mastercard’s “M/Chip

is very similar, according to Mastercard’s Aikat, as card processing time under
Chip Fast is less than 2.5 seconds.

terminal beeping noises will fade away
of being “beeped” at when the cashier terminal wants you to remove your chip
card? Good news: EMV terminal
transaction noises

will get quieter over time.

This is a transitional measure
that’s a response to our collective human muscle memory,” Oxman said. “We aren’t
used to putting a card in and leaving it for a few seconds and then pulling it
back out. In order to avoid instances where consumers accidentally leave their
cards in machines, that loud beeping noise is designed to remind people to pull
their card out.”

Once everyone is used to dipping chip cards
and retailer acceptance of EMV is ubiquitous, the loud noise won’t be necessary

next EMV migration wave will deter ATM card skimming

In April 2016, FICO reported a 546
percent increase in ATM skimming attacks from 2014 to 2015. Gas stations have
also seen a sharp rise in card skimming fraud
this year.

Oct. 1, 2016, marked the next
liability shift date in the EMV migration process, this one for Mastercard-branded
ATMs. Because of how smart chips secure card information, upgrading ATMs to EMV
standards means fraudsters will have a harder time skimming cards. Visa
scheduled its ATM liability shift to Oct. 1, 2017.

“Look for ATMs that have upgraded to
chip capability,” Oxman advises. Also, “If you use an older ATM, first look to
see if it has been tampered with or modified in any way because that’s
something to be concerned about.” If an ATM seems questionable, don’t use it.

And a few years later, thanks to a
recent liability
shift extension granted by Visa and Mastercard
, self-service gas stations
will have until October 1, 2020 to become EMV-compliant.

The transition
to EMV is not over
you think the EMV adoption process – and news about it – will wrap up soon,
think again. 

 “It’s still a process, not an event, so it
takes time,” Ericksen said. “It will take a few years after a liability shift
to get to about two-thirds of the payment volume in a country to be
chip-on-chip, a chip card in a chip terminal.”

While the migration
process comes with learning curves, adjustment periods and even annoyances for
all those involved, the adoption of chip cards should be good for consumers in
the end.It’s really a long-term
plan, so consumers will have less concern about having their cards compromised
and will be more confident using them everywhere without the worry they’ve had
in the past,” said Vanderhoof.

See related: We’ll reach chip card saturation in
, Video: Protect your identity in ways
chip cards can’t
, Gas
stations get 3-year extension on EMV transition

Updated: December 20, 2016

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