Happy Second Anniversary, EMV Liability Shift: The State of EMV in U.S. Retail

The 2015 EMV liability shift was implemented nearly two years ago, and a lot has changed in the world of retail since then. With all of these industry updates now taking hold, it’s the perfect time to review the current state of EMV in the U.S. market.

Predictions and Results of the Liability Shift

In the lead-up to the October 1, 2015 shift, a study by The Strawhecker Group (TSG), a management consulting company, found that only 27% of U.S merchants were on their way to becoming EMV-compliant. At the time, retail experts were not worried by this lack of preparation as 77 %of retailers reported plans to implement EMV in 2016, and TSG estimated that by 2017, U.S. merchants would be 90% compliant. 

Unfortunately, nearly two years after the shift, only one-third of these retailers have EMV-capable payment devices and of that third, not all merchants are even using their EMV terminals; today, only 18.61% of transactions are EMV while 52.2% of U.S. credit cards are adapted for EMV. 

Suffice to say, the EMV liability shift has been neither smooth nor speedy, and it has bred its fair share of skepticism. 

Dispelling Myths About EMV

The introduction of the shift was met with panic and confusion, and its impact was distorted by hype. Merchants were inundated with warnings of massive penalties if they did not transition to EMV, and when the shift hit and the sky didn’t fall, many were left wondering whether they had been coerced into investing in new hardware at the behest of EMVCo. Finance journalist Tina Orem attributed the issues with the shift to a lack of communication, saying that a major problem during the EMV transition turned out to be education.”[1]

Indeed, few businesses had an understanding of how the specific changes in liability rules would affect them and, given the current state of EMV in the U.S. today, it’s clear that misconceptions and myths continue to hinder merchants’ adoption of the technology. Case in point: retailers and consumers alike were under the impression that EMV was slower in comparison to its more than 50-year-old predecessor, the magnetic swipe card. In fact, EMV only takes 7 seconds to complete a transaction — about the same amount of time as a swipe.

Another growing misconception about EMV concerns its relationship to fraud. The U.S. accounts for almost half of all global credit card fraud, but only a quarter of the transactions. With an increase of EMV merchants and users, why the rise in fraud?

The increase is limited to card-not-present fraud (CNP) where the cardholder does not physically present the card — like an online transaction. This fraud is not addressed by EMV as the fraud was committed with physical card information and not information gathered from EMV technology. Six months after the liability shift, there was a 137% rise in CNP. However, unlike CNP, card-present fraud (CP) actually decreased 54% for merchants in the same time frame, but only those who were using EMV-capable payment devices. These statistics show that in the wake of the 2015 liability shift American credit card fraud became more concentrated on non-EMV users and e-commerce transactions while consumers using EMV cards at EMV-equipped retailers were protected. 

Fighting Fraud and Making Money

Not only will U.S. merchants’ full transition to EMV-capable hardware continue to significantly diminish CP fraud, it is quickly becoming a competitive imperative, with 75% of consumers preferring to pay with chip cards. VP of iQmetrix Payments Tabitha Creighton explains that customers prefer to work with merchants who use EMV” and Creighton predicts that 98% of American consumers will have chip cards by 2018

Ready to ensure that the 3-year anniversary of EMV brings better news? Contact a payment specialist and become armed for the future of retail transactions.

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[1] Tina Orem, EMV One Year Later: Lessons Learned, What’s Next.” Credit Union Times 27:34 (October 52016).