Are you getting a blank stare from your clients when talking about EMV adoption and the fast approaching liability shift? It's not surprising.
A 2014 Aite Group telephone survey of merchants in the United States found one-third of respondents didn't know they faced liability for the cost of card fraud beginning October 2015 if they couldn't accept EMV payment cards.
That means plenty of business owners and managers in the US lack basic information about this significant change. That's probably because US EMV adoption has lagged behind most of the rest of the world in recent years.
In 2014, American card issuers deployed just over 100 million chip cards, compared to about 3.3 billion everywhere else. Based on data from the fourth quarter of 2014, 32 percent of transactions worldwide used EMV technology, with just over a tenth of a percent of those occurring in the US.
While industry experts predict this significant gap will soon be closing, here's a look at the progression of EMV adoption across the globe.
The Path to Global EMV Adoption
First developed by EMVCo (originally a consortium of Europay, MasterCard, and Visa) as a technology standard aimed at reducing card-present payment fraud, chip card use in Europe dates back to 1986.
Compared to the conventional mag stripe card, EMV technology uses encryption to store and protect the customer's sensitive data. Each time the card is presented for payment, the embedded chip creates a unique, one-time transaction code.
Leading the switch from magnetic stripe cards at the point-of-sale is what's known as Europe Zone 1 (a group of 37 countries including Germany, the UK, France, Spain, and Sweden), along with Canada, all Central and South American countries, and Africa and the Middle East. These regions processed greater than 80 percent of all card-present transactions as EMV in 2014.
During the same time period, Asia (including China, Japan, India, Australia, New Zealand and others) lagged behind with just over a quarter of transactions as EMV, followed by the US with a negligible amount.
Reasons for these varying rates of EMV adoption are not completely clear, but in the United States increased credit and debit card fraud, and rising numbers of security breaches are driving payment processors to force a change.
Reduced Fraud, Increased Security
With just under five percent of the worldwide population, the US handles a quarter of global credit card transactions, but absorbs half of associated fraud.
That's an astounding percentage, with much of the fraud stemming from the security issues associated with mag stripe technology. Increasingly fraudsters are copying numbers from cards in EMV-enabled countries and using the stolen cards in less secure payment environments, like the United States.
Evidence from every region in the world shows fewer fraudulent card-present transactions following EMV adoption. Once the US migrates to chip cards, the world's major markets will share a single fraud protection standard.
An early adopter, the UK saw a 55 percent decline in counterfeit fraud in the eight years following its 2004 EMV implementation.
And the 2008 switch to EMV for both Australia and Canada showed corresponding reductions in counterfeit fraud of 38 percent in just two years, and 54 percent in five years.
What This Means for the US
During this period of EMV adoption, card issuers in the US plan to bridge the gap with hybrid cards. Incorporating both an EMV chip and a magnetic stripe, these hybrids will allow consumer purchases to proceed whether or not the POS is EMV-enabled. POS software then defaults to the highest level of security for the individual transaction.
But as more and more EMV cards reach consumers, smart merchants will be getting out in front of the liability shift.
As a value added reseller, you'll have the opportunity of guiding customers in selecting system components that fit with existing hardware and software while ensuring compliance with the new, now global standards.
Upgrading and replacing MSR's. Enhancing server capabilities. Ensuring compatibility and connectivity with POS software, databases, and enterprise software. There's plenty to do in just a short period of time.
What questions do your clients have about EMV adoption?
ABOUT THE AUTHOR
Stephen Bochniarz leads Ingram Micro’s DC/POS Payments Program. He has been part of the DC/POS division at Ingram Micro since 2013, specializing in POS hardware. Stephen has also become the subject expert on EMV readiness and supporting the payment terminals in support of payments and EMV implementation process. With over 12 years of experience, he has a strong background in retail, and retail management.
Have questions or want to learn more? Contact Stephen at:
Phone: +1-800-456-8000 Ext. 67366