The US payments industry must improve communication to merchants and consumers on EMV’s benefits to avoid a drawn-out and expensive move to this new baseline for transaction and data security.
The United States is the last developed payments market in the world to migrate to the EMV standard. Previous migration exercises across the European Union, Australia and Canada all benefited from coordinated high-visibility communications campaigns to both merchants and consumers. Results were impressive: in Canada, Point of Sale (PoS) fraud declined by 88% over two years, with the UK and Ireland seeing similar reductions in fraud and increases in card usage to boot. By the end of 2014, more than 93% of all transactions in the EU were undertaken using EMV-ready cards and devices; that figure in the US is currently around 40%, more than one year in to the migration exercise.
Those who argue that the US is an exception are backed by the facts: as well as being the world’s largest payment market, it’s also one of the most complex and diverse, with more than nineteen payment processing networks and a long tail of card issuing institutions. Add to this the fact that more than 12.5 million of the 14 million acceptance locations in the US are small and medium enterprises (SMEs) and the scale of the challenge facing the industry in migrating to the EMV standard becomes clear.
The absence of a government mandate to drive EMV forward such as countries in the EU enjoyed further blurs the picture, likewise the lack of a single pan-industry voice ensuring clear and consistent communication. These factors help to explain why senior executives interviewed for our new report, “Squaring the Circle: Driving EMV Migration in the US” described progress to date on EMV in the US as “patchy”, with one executive predicting “a lot of pain ahead” for the US card industry unless things change quickly.
Outside EMV’s many benefits in terms of transaction security and data encryption, there are now clear “push” factors that should encourage the US to implement EMV as quickly as possible. For instance, 76% of all card data breaches world-wide occur in the US, and last year US card fraud hit a record high of US$8.5billion as fraud migrated from EMV-ready markets. Small wonder, then, that more than 90% of those interviewed for our report viewed fraud as the key driver for EMV migration.
Whilst EMV card issuance has been growing rapidly in the US over the last two years, acceptance is a different story. To date, around one million of the 14 million acceptance locations in the US are EMV enabled, and these are mainly major chains such as Banana Republic, Walmart and others. Reaching the remaining 90% of merchants and persuading them to migrate to the new standard is going to involve significant effort on the part of the US card industry. 60% of those interviewed for our report believed that “educating payment industry stakeholders” was going to be a key factor in a successful US EMV migration for 2016; 64% also saw “making a business case for EMV” as a key issue.
Those interviewed for “Squaring the Circle” also discussed the challenges US consumers have faced in using EMV-compliant cards and terminals. Some clerks have reported that consumers don’t understand why they have been given new chip cards, while others have complained about slow transaction speeds with chip and PIN terminals.
These concerns suggest that the US card industry as a whole has not been doing enough either to make the business case for EMV to merchants, or to promote EMV’s benefits to consumers. Comparisons with Canada or with EU markets are stark: there is currently no industry-wide body promoting EMV migration in the US, whereas the UK industry, to take one example, funded a six-year communications program complete with billboard and TV advertising, point-of- sale information and a dedicated website.
There is a view in the US industry that investment in EMV migration may be misplaced, since payments are migrating rapidly into digital, virtual, contactless and mobile environments, and away from the traditional payment card. However, this argument misses the real benefit of EMV, which is not as a card-specific data security and transaction processing tool, but as a standard that can be applied across all payment methods and all transaction environments, from digital wallets and contactless payments through to traditional card-present transactions. Indeed, EMV will be the standard consumers around the world will look to for transaction and data security as commerce moves in to the virtual world: we call this multi-platform, multi-environment payments future the “omni-channel”, and those players who want to lead in this environment should be those pressing hardest for EMV migration in the US today.
To ensure a successful EMV migration in the US, the payments industry needs to move quickly to orchestrate coherent communications campaigns to both merchants – and especially SME merchants – and consumers. The message should not just be that EMV helps to protect you against fraud and data compromise: as an industry, we also need to focus on the future, and on EMV’s role in enabling mobile and digital commerce, contactless payments and the security of near-field communications (NFC) in financial services. Failure to do so will see not just increases in fraud and data breaches, but could also see the United States lose its leadership position in payment technologies.
For a copy of Worldnet’s Squaring the Circle report on EMV, please follow the link – https://www.worldnettps.com/emv-adoption/