As merchants are busy upgrading and fine-tuning EMV terminals at the point of sale (POS), card issuers have been working to put replacement cards into the hands of consumers. It's not an easy task.
An estimated 1.2 billion credit and debit cards must be upgraded to EMV in the United States, a relatively time-consuming process. At the close of 2015, EMV-credit-card adoption included about 50 percent of cards in circulation, although the pace of debit-card replacement is happening more slowly.
For business owners who have not yet upgraded POS terminals to EMV, a growing critical mass of consumers armed with the new cards may be the needed catalyst for change. Here are four predictions for the coming year.
1. "Chip on chip" transactions more common
While the official EMV liability shift happened in October 2015, transactions that include an EMV card dipped at an EMV terminal are still occurring less often than magnetic-stripe swipes. That's because many merchants have yet to upgrade card readers at the POS.
At the end of 2015, 5 percent to 10 percent of merchant transactions in the United States featured chip cards read by EMV terminals. That's largely because fewer than one-fifth (17 percent) of US face-to-face card-accepting merchants can process EMV transactions. But with increased EMV-credit-card adoption, the number of "chip on chip" transactions is likely to increase significantly in 2016.
2. Debit cards will catch up with EMV-credit-card adoption levels
Three times as many credit cards included EMV chip technology as did debit cards, industry reports from 2015 show. And the delay in replacing magnetic-stripe cards could make these slower-issuing banks more tempting targets for fraud.
Because of some unique requirements of the debit-card transaction system in the United States, the industry took longer than expected to put new procedures in place for EMV. But as 2016 progresses, EMV-debit-card adoption rates can only increase, helping protect both merchants and consumers from fraudulent activity.
3. Increased familiarity will speed up EMV transactions
For a variety of reasons, EMV transactions at the POS reportedly take an estimated 15 seconds longer than do magnetic-stripe cards. Part of the time delay can be attributed to unfamiliarity with new processes at the checkout stand. Consumers often need to be prompted to "dip" the card rather than swipe it and may not know whether or not a credit-card terminal is EMV-ready.
For most businesses, this brief delay won't affect customer throughput. Merchants can do their part by training employees and communicating with consumers about how to use the new cards. As more consumers acquire chip cards and can use them with a greater number of merchants, transaction times will decrease. Business owners can also enable mobile wallet solutions, where customers can simply "tap and go" with a smartphone.
4. Fraud likely to move away from card-present transactions
As seen during EMV-credit-card adoption in markets around the world, card-present fraud decreased and moved to other channels. While chip security protocols can't prevent a fraudulent card-not-present transaction, other strategies have been successful.
Both tokenization, where cardholder data is replaced with a random sequence of characters, and end-to-end encryption, which hides the credit-card number throughout the entire transaction, have shown promise in keeping information out of the hands of hackers and data thieves.
2016 promises plenty of turbulence for merchants, card issuers, and consumers as they navigate the waters of EMV adoption.
What predictions do you have for EMV-credit-card adoption in 2016?