Just over 12 months have gone by since the merchant services and credit card processing industry in the United States faced the historical EMV liability shift. October 1, 2015 was the big day.
Switching to the Europay, MasterCard and Visa (EMV) system has been a major responsibility in terms of installing terminals and educating shoppers and merchants about the use of chip cards.
Credit card processing has not been affected as much; in fact, fraudulent transactions due to counterfeit cards have decreased substantially since October of last year. Nonetheless, the shift has also uncovered some realities that American retailers must confront.
The Good News about Chip Cards
In the United States, more than 700 million credit and debit chip cards are currently in circulation. This is certainly encouraging to learn a few weeks prior to the busy holiday shopping season. Nearly 45% of shoppers who have the new cards are using them more than three times per week. There are about 2 million merchants that have implemented the new chip card terminals, and more than half of these retailers are small-to-medium businesses.
The Current EMV in the United States
The most salient problem with the liability shift is related to the terminal experience. Merchant service providers report getting complaints from their clients about the extra time it takes to complete a chip card transaction with the new terminals, which require shoppers to insert or dip their cards and input a PIN on a keypad.
The old “swipe and sign” transaction of legacy credit and debit cards used to be a lot faster, but it was also very problematic in terms of counterfeiting and fraud. In Europe, chip cards have been around for more than a decade, and thus credit card companies such as MasterCard and Visa are working on ways to speed up the checkout experiences, and this is already being implemented in some places.
Credit card processing companies are reporting another unpleasant reality associated with the switch: the increase in chargebacks has been inversely proportionate to the reduction in counterfeit fraud cases. For businesses such as restaurants, chargebacks have been a major hindrance because owners were not prepared for the sudden deluge. Payment networks such as MasterCard have indicated that chargeback volume will decrease as chip cards become the new American standard.