Why the future is bright for EMV in America
In the past year, the payments industry has seen a surge in EMV-enabled merchants and card holder adoption. What some merchants initially saw as a challenge is quickly turning into a success story.
We sat down with Steve Cole, merchant product manager of EMV at Vantiv, to discuss the recent rise in EMV-enabled U.S. merchants, what makes the U.S. payments environment so unique and what we can expect in 2017.
Q: Business Insider recently reported that EMV-enabled merchants grew 191% YoY, is this something you’re seeing as well?
Yes, we are seeing a similar trend. I think given that we are still in the early stages of EMV migration in the U.S., that kind of growth rate isn’t very surprising. When you start with fairly low numbers, they are easy to double. Once the liability shift hit and merchants started to feel the impact from chargebacks, many merchants accelerated their implementation projects.
Q: What is holding U.S. merchants back from adopting EMV-enabled terminals?
There is a lot of uniqueness in the U.S. market that slowed the initial start of many migration projects. I think implementing EMV was a lot more complicated than many merchants and solutions providers anticipated, and there is also a brand certification process for the terminals that created some logjams around getting those solutions certified so that they can be deployed. Even the certification process itself is a brand new process that merchants and solution providers had to go through. It wasn’t just that they were adding more testing, it was an entirely new system they had to learn.
Q: Overall, what has been your takeaway on the EMV liability shift? How has it compared to other countries?
The complexity of the U.S. payments environment makes it difficult to judge in comparison to other countries. First of all, the U.S. is much larger than most countries. We have well over 10 million points of sale that need to be upgraded. Canada for example has had 1/10 of this scale – many markets even less. Secondly, we must consider integrated systems. The U.S. merchants currently employ integrated technology to process payments; well over five million of these points of sale operate in this fashion. These five million points of sale require that each of their independent software vendors develop EMV into each of their products and complete a complex testing process mandated by the brands that typically takes six months to complete. No other market had this issue as almost all other markets utilizes stand-alone terminals as their primary payment technology.
Finally, EMV’s specifications were not originally able to support Regulation II (Durbin) dual network requirements. It took over two years for the industry to develop a solution and Visa and MasterCard to finalize their requirements. Merchants and acquirers were required to wait until these specifications were issued in order to begin their EMV enablement for debit, which delayed EMV adoption.
Given all of that, the U.S. has certified the same number of terminals equal to the entire country of Canada’s acceptance in matter of months. I definitely think the U.S. is doing quite well compared to other markets.
Q: Have you seen EMV cause any friction during the holiday shopping season?
This holiday season has been better than last year. That said, merchants are still working to improve their implementations, and unfortunately, implementing EMV isn’t just flipping a switch. There is a lot of payment application coding that has to be done, and that coding can be done very efficiently or it can be done not so efficiently. We have seen that some merchant implementations where the card is in the terminal for 10 – 30 seconds, but a lot of that is getting cleaned up. I think we will continue to see less friction this year, compared to last year.
Q: Many consumers find EMV to be a hassle – what can merchants can do to improve the customer experience?
All of the global card brands have published guidance around faster EMV processing. These go under the names of Quick Chip and M/Chip Fast. These methods allow for the card to be removed from the terminal much earlier in the transaction process than it is for a standard EMV transaction. This gives the card holder the experience that is much closer to the swipe-ahead process that they have come accustomed to with a magnetic stripe card. This faster EMV process allows the card holder to put their card into the terminal at any point during the checkout process and then remove it after only a few seconds.
Q: With the extended deadline for gas stations and convenience stores, do you anticipate increased fraud at those locations?
As we see more retail locations become EMV enabled, we can expect to see fraudsters start to target those merchants like gas stations that have not migrated yet. This has happened in other markets and even within industries where some merchants implement and some don’t. However, there are some tools that merchants in the fuel space can use at their pumps to try and combat fraud. For instance, card holders may have to type in their zip code when completing a transaction.This is another piece of data that fraudsters would need to have in addition to the card holder’s payment information.
Q: Will the card holder pay-at-the pump experience look different than the POS in-store experience?
It will most likely look more like the faster EMV processing we are beginning to see with Quick Chip and M/Chip Fast. Fuel transactions today already use pre-authorization requests with a set amount, similar to the faster EMV process, to tell the merchant there are funds available in the card holder’s account. I think the experience at the fuel pump will be a faster experience than what it was initially at retail merchant locations.
Q: Do you think consumers will prefer to use contactless payments such as mobile wallets over EMV cards?
I think the jury is still out on contactless payments in the U.S. There are other markets where it has taken off, like the UK, but they had key uses cases driving adoption. For instance, the UK had the Transport for London initiative that enabled cardholders to use contactless cards for public transportation. This was a very compelling use case in that market. Until mobile payments start implementing loyalty programs or some other value added services, I don’t know if there will be that compelling use case for card holders to take out their phone to pay versus using a contact card to pay.
Q: What is next for EMV in 2017?
Even though the AFD liability shift for fuel merchants has moved to 2020, all of the merchants I work with are still going full steam ahead with their implementations. I think we will see a lot of activity in the fuel space. It’s a very complicated environment to implement EMV, but we are starting to see hardware and software solutions coming to market. I think we will start having a pay-at-the-pump EMV experience at some merchants before the end of 2017.