State of the Market: An Update on EMV Progress
Today, approximately a third of U.S. merchants are enabled to accept chip cards[i], and about three quarters of consumers have at least one chip card in their wallet[ii]. As more payment acceptance points, such as in-store point-of-sale terminals, ATMs and automated fuel dispensers become enabled for EMV, fewer opportunities for counterfeit card fraud, the largest source of in-store card fraud in the U.S.[iii], will remain.
“The U.S. will need to reach critical mass of chip-on-chip[iv] transactions before we will start to see big drops in counterfeit card fraud,” said Randy Vanderhoof, director of the U.S. Payments Forum. “From what our chip-enabled merchants are telling us, chip-on-chip transactions are increasing at a very solid rate and our larger enabled merchants are seeing most of their transactions come in as chip transactions.
“As merchant enablement continues through the rest of this year and into next year," Vanderhoof continued, "I expect to see chip-on-chip transactions become a bigger proportion of overall transactions. As a Forum, we are working to identify pain points with the EMV migration and address issues to help move merchant enablement forward, and help the industry reach the goal of widespread chip card acceptance to remove counterfeit fraud from the system more quickly."
Trending Topics: The “Anniversary” of EMV
With October noted as a significant month in the U.S. migration to chip payments, and additional important dates on the horizon for the ATM[v] and petroleum[vi] industries, the U.S. Payments Forum explains the role of these dates in the overall migration journey.
“With this October marking a year since the policy changes for in-store fraud liability went into effect in the U.S., there is a lot of talk around this being the ‘anniversary of the U.S. chip migration,’ but we are in the midst of a large, complex migration that cannot be summarized by a single year’s activity,” Vanderhoof added. “October 2015 was a key date representing fraud liability policy changes for in-store chip card payments, while there are other key dates ahead for the ATM and petroleum industries. It is important for the payments industry to be aware of, and prepare for these dates as we move through the bigger journey towards full enablement of chip technology, while also understanding that this migration will take time—especially considering the size and complexity of the U.S. payments market.”
U.S. Payments Forum Priorities: Moving Chip Implementation Forward
Merchant migration – The Forum has published several new documents that address challenges facing the market that are a result of many merchants being in a state of transition to full EMV acceptance, such as addressing options to improve the speed of EMV transactions, the best practices for managing chargebacks, and changes to the minimum requirements for merchants impacted by the faster EMV specifications that were announced by the payments brands.
ATM industry – With the next ATM liability shift coming this month, the U.S. Payments Forum and its ATM Working Committee are working to provide implementation guidance and other resources for small banks, credit unions and independent ATM owners for an efficient, effective implementation of EMV chip card acceptance at ATMs.
The Forum’s ATM Working Committee has developed a workshop series, “Implementing EMV at the ATM,” to provide guidance on becoming chip-compliant at the ATM, and is based on the Forum’s white paper, “Implementing EMV at the ATM: Requirements and Recommendations for the U.S. ATM Community.” The next workshop, co-hosted by the National ATM Council, will be held on October 19 at 10am Eastern during the NAC2016 Conference & Expo in Orlando, Fla. ATM stakeholders preparing to implement EMV at the ATM in the U.S. are encouraged to register at http://thenatmc.org/EMV-ATM-2016.
Petroleum industry – To provide similar guidance for the petroleum industry, the Forum’s Petroleum Working Group is currently working to provide implementation guidance to help the petroleum industry prepare for the migration in advance of the 2017 liability shifts. Two particular areas of focus include addressing commonly asked questions about the chip migration in the petroleum industry, and the issuance and acceptance of chip-enabled fleet cards.
Additional merchant segments – In addition to its focus on the ATM and petroleum industries, the Forum will continue to provide education and guidance to other segments that have not completed their implementation, or are working out further challenges related to their implementations, such as the hospitality, transportation and grocery industries.
New and emerging payment technologies – As part of the July 2016 transition from the EMV Migration Forum to the U.S. Payments Forum, other priorities for the organization in the upcoming months beyond those directly involving EMV will include discussions and additional Forum work group activities addressing new and emerging payments technologies in the U.S., such as tokenization, mobile and contactless payments, card-not-present transactions, point-to-point encryption, and others.
[i] Strawhecker Group estimates that 29 percent of U.S. merchants are currently able to accept chip-based transactions
[ii] 88 percent of Mastercard U.S. consumer credit cards have chips, representing a 105 percent increase in chip card adoption since the October 1, 2015 liability shift. As of August, there were more than 363 million Visa chip cards in the market.
[iii] According to Aite, counterfeit fraud in the U.S. accounts for 37 percent of card fraud, which is significantly higher than other types of card-present fraud
[iv] A chip card payment processed at a chip-enabled terminal
[v] The first liability shift was April 19, 2013 for inter-regional Maestro transactions at U.S. ATMs. Upcoming liability shiftsinclude Mastercard’s ATM liability shift on October 21, 2016, and Visa and Discover’s liability shifts on October 1, 2017
[vi] American Express, Discover, Mastercard and Visa fraud liability shifts for automated fuel dispensers are slated forOctober 1, 2017