EMV Liability Shift: Are You Ready?

The talking is nearly over for the U.S. payments industry as October 1st sees the all-important EMV liability shift. Chip cards are being issued to consumers and merchants are upgrading their point of sale terminals to adapt. Or are they?

Given the advantages of EMV cards, we would expect more enthusiasm. The key shift resulting from EMV will be a reduction in card-present fraud. Given the volume of fraud in the U.S., this is a huge step forward.

Latest figures contained in the Nilson Report shows 48.2 per cent of worldwide plastic card losses – amounting to $7.86 billion in the last year – took place in the U.S.

David Robertson, publisher of The Nilson Report, believes there are a number of factors at work, but “nothing mattered more than the lack of an EMV-compliant infrastructure.”

But it seems there is a degree of inertia affecting EMV compliance.

Just how ready the U.S. is for this seismic shift in payments is up for debate. From the start of October all point of sale terminals will need to be EMV-compatible, or merchants will face liability for the losses on EMV cards.

Mercator Advisory Group said in a recent report that the lack of enthusiasm for EMV in the payments industry meant progress towards compliance has slowed in 2015 as issuers and merchants deal with a range of technical, logistical, and educational challenges.

“The move to EMV is a beneficial thing for the U.S. payments industry, but credit card issuers and merchants are struggling to reach full compliance before the fraud liability shift in October,” commented Alex Johnson, senior analyst at the research group and the author of the note. “We need to prepare ourselves for a longer and messier transition than many originally anticipated.”

Forrester Research doesn’t expect widespread EMV adoption in the U.S. until 2020.

Meanwhile, Javelin Strategy and Research found as many as three-quarters of merchants do not expect to be prepared for the October 1st deadline.

The firm’s payments director, Nick Holland, said: “The majority of small merchants are not only not ready for EMV, they are not even aware of EMV.”

He believes the industry has not yet done enough to inform merchants about the changes and what their obligations will be under the new liability rules. According to Mr Holland, there is a “general lack of ownership” over EMV education.

Interestingly, we have seen that restaurants are starting to explore what EMV means for them. However, consumers don’t exactly seem raring to go with EMV either. Barely one in ten Americans has received a chip-enabled card. Of those, only about a third (35 per cent) have used them in a chip compliant terminal, according to a poll from GfK Public Affairs and the Associated Press.

One-third (30 per cent) of people issued with chip cards don’t know how to use them, while almost half (46 per cent) of the consumers polled said they don’t know why EMV cards are being introduced.

This is being tackled by the industry. Visa been going round 20 U.S. cities to advise businesses on the repercussions, while the CHIP IN initiative is the latest cross-industry scheme to educate businesses and consumers more widely about the benefits.

Some may argue that this is too little, too late, but the great advantage of EMV cards is that once consumers get how to use them, there is no going back. Ready or not, EMV is here to stay.