Way back in 2012, MasterCard and Visa agreed that by October 1, 2015, every retailer in the United States would have to have new terminals that would accept chip-and-PIN cards, like those that were found in most of Europe, as well as in Australia, Brazil, and a variety of other countries. Those countries ditched magnetic stripe cards, like the ones the US uses primarily today, more than a decade ago to mitigate credit card fraud.
October 1, 2015 is now upon us, and the changeover to chip cards in the US is patchwork at best. Over the last ten years, comparatively lower levels of credit card fraud in this country dampened any momentum that an upgrade had—if banks weren’t losing money hand over fist, it was easier not to have to reeducate customers on how to use a credit card.
Even on the due date for the upgrade to the so-called EMV standard (named for EuroPay, MasterCard, and Visa, the card networks that developed the standard over a decade ago), that logic remains. It has been estimated that only 40 percent of cardholders in the US have EMV-compliant credit cards.
Similar numbers apply to merchants. The Strawhecker Group, a management consulting company, surveyed large payment-service providers that collectively work with more than a quarter of the merchants in the US. It found in early September that only 27 percent of those merchants had a plan in place to allow them to process EMV-based transactions as of today. A similar survey from Randstad Technologies recently found that 58 percent of merchants are “on their way” to be able to accept EMV-based transactions, but the other 42 percent either had no plans to make the deadline or weren’t even aware that they have to get new terminals to accept new chip cards.
That’s a problem because the way card networks and issuers are enforcing this upgrade is through a nationwide liability shift. According to the terms of the EMV shift, if a merchant isn’t equipped with the latest terminal technology, the merchant is now responsible for any costs associated with card fraud that takes place at their terminals. Usually, making good on card fraud is the purview of the card issuer, so nearly half of US merchants are in for a big surprise if any fraud happens and they’re suddenly left with the bill.