Much like the checkout transaction times with a chip card, merchant adoption of EMV chip card technology is progressing slower than expected. One year after the October 1, 2015 EMV technology deadline that is more commonly referred to as the liability shift for converting payments systems to accept chip cards, only an estimated 29% of U.S. merchants are actually able to accept chip-based transactions. This is according to The Strawhecker Group’s latest survey. The group’s survey in January estimated that more than 50% of merchants would have an EMV terminal by this time.
Our own merchant transaction data points to the same overall anti-climactic trend, though at the transaction level we have seen a dramatic increase in our merchants’ actual number of chip-card transactions. Clearent merchants accepted nearly 760% more chip card transactions this September compared to last September. You read that correctly. Seven hundred and sixty percent. Our total number of EMV transactions compared to other transaction entries such as mag stripe increased from 2.7% to 20%. Even with these significant changes, there is still a long way to go.
Why the slow progress?
Apparently coordinating a roll out across the U.S. payment industry is similar to herding cats. It’s possible, but it takes much longer than you’d expect.
Most consumers have chip-enabled cards. MasterCard reports that 88% of its U.S. consumer credit cards have chips. Yet, only a quarter¹ of all payment card accepting merchants are able to accept them.
There are several reasons why these merchants have not adopted EMV and therefore are now liable for in-person payment fraud. Upgrading a stand-alone terminal can be fairly easy and non-disruptive, but many retailers have an integrated point-of-sale (POS) system.
Here are a few key obstacles that caused some merchants to miss or turn a cold shoulder to the EMV technology deadline and liability shift.
- EMV certification process bottlenecks. Every EMV solution must be certified with a processor and the card brands. The card brands have hired certification vendors to help with the process, but there is still a long line. Last we heard there was a 12-week backlog and then an additional 8 weeks of running transactions and testing.
- POS system upgrades can be expensive and merchants might be interested in delaying the expense as long as possible.
- Fear of PCI. Some merchants are nervous to make any change to their payment processing for fear of increasing their risk of fraud or PCI requirements. There are in fact many solutions that are designed for EMV certification that actually reduce PCI scope such as semi-integrated solutions.
- Slow EMV transaction times. Some merchants have flat out decided not to adopt EMV because they are worried about lengthening their transaction times. This is especially likely in industries where checkout speed is a competitive differentiator such as quick service restaurants and retail.
¹ Digital Transactions reports that there are as many as 2 million merchants accepting chip cards now out of an estimated 8 million merchants that accept payment cards.