Retailers as a whole missed the recent industry-imposed deadline for enabling secure chip-enabled card transactions, known as EMV. That, however, should have come as no surprise.
Leading up to the “deadline” of October 1, the payments company ACI Worldwide reported that nearly 3 in 5 US consumers with at least one credit or debit card have yet to receive new chip-enabled cards. Added to that, The Strawheker Group said that only 27% of merchants who accept cards would have EMV-ready terminals by the deadline. Further, only 25% of debit cards are expected to be chip-enabled by year’s end, according to Pulse.
Of course, as a commerce technology provider, Demandware applauds any effort to reduce the risk of fraud, but the October 1 deadline was much ado about nothing and will be for some time. Strawheker Group also projects that by the end of 2017 – a full 14 months after the deadline – 90% of merchants will have the capabilities to process chip-enabled cards.
That said, there is still a long road ahead on the EMV journey for both card issuers and merchants. All that not withstanding, let’s suppose that every cardholding shopper and every merchant had the required cards and systems in place to enable EMV transactions today. Would it make credit and debit card transactions significantly more secure?
No – and here’s why: the US is only now beginning to implement technology that is more than two decades old, and runs the real risk of becoming obsolete before we come close to seeing widespread adoption. Payments technology innovation is far behind in the US. We’ve already missed the boat and will continue to see it sail further away even after EMV implementation. Here’s 3 reasons why:
Chip and Signature, Chip and PIN
The way in which the EMV system will be implemented in the US only nominally reduces the risk of fraudulent transactions because it calls for “chip and signature.” This means the shopper dips their chip-enabled card into a reader and signs for the transaction. This two-step process might seem bulletproof, but it’s actually far less secure than the chip and PIN method used in other countries (UK and Canada). We all know signatures can easily be forged.
Mobile wallets could make physical cards obsolete
Consider the expected huge rise in mobile payments, and other payment types, that will diminish the need for cards to be present at all. Mobile payment has been transformative even in its infancy, and is expected to grow exponentially. In fact, the industry has done more with EMV to drive mobile wallet adoption than anything the mobile wallet providers could do on their own! In North America, the number of shoppers using mobile payments is expected to surpass 75 million this year. Will more than 75 million Americans have EMV cards by the end of this year? Doubtful.
Shoppers are already looking for the “next big thing”
Lastly, in an era of secure, flexible cloud computing – the idea of a tiny computer chip on a dip-able card strikes me as rather quaint, if not completely outdated. Will consumers (who have been trained to swipe or insert and quickly remove cards) get used to inserting their card into a reader, and leaving it there for several seconds until it is processed? Or will they move onto more seamless payment options that already exist in the market? I’ve been told by one our payment partners that some quick service restaurant chains have indicated they will not implement EMV based on the negative impact on customer service.
There is no doubt in my mind that the transition (assuming a wholesale transition actually takes place) will take some time, as retailers weigh the significant costs of implementing new hardware and software vs. their potential liability. And while they are weighing the costs of implementing 20-year old technology, shopper’s taste and tech preferences march on.
Eric Olafson, SVP Store Solutions, Demandware