EMV liability shift one-year later: Q&A with Ray Moorman
It's been more than a year since the highly-discussed EMV liability shift, which saw financial liability for card present counterfeit fraud shift from card issuers who had reissued chip cards to merchants who have not yet updated their systems to process using the chip on the card. This marked a major milestone in the payments industry and one that would significantly change the checkout experience.
To discuss the one-year anniversary of the EMV liability shift, we sat down with Ray Moorman, Director of Product Strategy at Vantiv, to get his thoughts on how the shift has unfolded and what’s on the horizon for 2017.
Q: We've passed the one year mark since the EMV liability shift took place. Overall, what’s been your takeaway?
In my opinion, I believe the industry has made significant progress over the last year when it comes to EMV and, overall, things have been positive. Looking back on the past year, it’s impressive how far the industry has come, given the size and diversity of the US market. But, while we may have made tremendous progress, there is still a long way to go until merchants and consumers (both large and small) consider EMV the “norm.” In a way, EMV still feels a little bit new and scary.
Q: So, we’re trending in the right direction, but when do you think EMV implementation will reach a critical mass?
If we consider critical mass at about the 60 percent mark, I think we will see that tick over sometime in 2017. We’re seeing an increasing number of merchants that are going live with EMV and, while Q4 might be slow as many businesses are in the midst of their “busy season,” we expect Q1 2017 to pick back up. From the issuer’s side, Visa is already seeing well over 50 percent of chip-enabled credit card adoption and up to 35 percent for debit cards.
Q: From the consumer perspective, what do you believe their overall reaction has been to EMV?
I think as with any change to consumer behavior (in this case, inserting a chip), there will be some friction. But, over time, the reaction from consumers has continued to trend positively – largely because, despite the new and slightly lengthier chip-card process, a majority of consumers believe that it’s worth the added security. What’s great is that consumers are starting to expect to be able to pay with EMV-enabled chip cards, meaning it’s actually becoming the norm. In fact, frustrations are often now occurring when the payments experience ISN’T chip-enabled. That’s a good sign for the industry.
Q: You mentioned consumers’ positive reaction to increased security. Where does that leave the industry as it pertains to card-not-present fraud?
Fraudsters will always follow the path of least resistance. For some time, that was magstripe cards. However, as EMV takes off and we get closer to reaching the saturation point we discussed earlier, fraudsters will have to look for new avenues as card security tightens. As you might expect, one of the fraud trends that we are starting to see is account takeover. While it isn’t too relevant to the EMV shift, the rise of other mobile and digital payments technologies often negate the effects of EMV protection – a simple example being that a website isn’t able to understand the difference between a EMV chip or magstripe card. Other security measures, outside EMV technology, must be taken.
Q: What does the implementation of EMV technology mean for the mobile payments landscape?
While there will always be a place for credit or debit cards (at least in the near future), the EMV liability shift has resulted in an “infrastructure refresh.” Many merchants who have or are upgrading their POS terminals are preparing for future technologies. This means that the terminals are often equipped with advancements such as NFC-acceptance capabilities, thus, helping grow mobile payments over time. Mobile payments will grow because of EMV, but I don’t think it will replace the physical card any time soon.
Q: What will be the typical refresh cycle for EMV terminals and do you think we will see a repeat of last year any time soon?
I believe that, typically, refresh cycles lie somewhere in the three-to-five year range. The good news, however, is that there are a lot of remote update capabilities where merchants can receive software updates, so long as the physical hardware can handle it. What we will continue to see is evolving POS solutions with increased functionality, as a lot of the early adopters and initial solutions didn’t support advanced features such as pin bypass, quick chip etc. Fortunately, though, I don’t think this will result in another mass update anytime soon as merchants will only upgrade as dictated by business needs.
Q: Where will the industry be next year at this time?
Best guess – we will be at a saturation point or critical mass at about a 60 percent merchant adoption rate. We’ll definitely start seeing (and are already seeing) EMV 2.0 where the industry is enhancing functionality and improving the checkout experience with things like quick chip. Now that the initial roll out is underway, both providers and merchants will be looking to advance portfolios, adding additional devices with new capabilities that solve new use cases. And, over time, the transaction experience will improve as the EMV experience becomes more consistent from merchant to merchant.