Today is supposedly a big day in retail. It’s the day that retailers are to meet an industry-imposed deadline for enabling secure chip-enabled card transactions, otherwise known as EMV for EuroPay, Mastercard, Visa.
As a commerce technology provider, we applaud any effort to reduce the risk of fraud, but today’s “deadline” is much ado about nothing.
For starters, the payments company ACI Worldwide reports that nearly three in five US consumers with at least one credit or debit card has yet to receive new chip-enabled cards. The Strawhecker Group says that only 27% of merchants who accept cards will have EMV-ready terminals by today’s “deadline.” Further, only 25% of debit cards are expected to be chip-enabled by year’s end, according to Pulse.
But let’s put all that aside.
Let’s suppose that every cardholding shopper and every merchant had the required cards and systems in place to enable EMV transactions.
The fact remains that the way in which the EMV system will be implemented in the US only nominally reduces the risk of fraudulent transactions.
Why? Because it calls for “chip and signature,” which means the shopper dips their chip-enabled card into a reader and signs for the transaction. This two-step process might seem bulletproof but is far less secure than the chip and PIN method used in other countries, as signatures can easily be forged. And what is really protected? EMV cards do not address “card-not-present” fraud, which is on the rise.
At the same time, the US is only now beginning to implement technology that is more than two decades old and runs the real risk of becoming obsolete before widespread adoption.
Consider the expected huge rise in mobile payments, and other payment types, that will diminish the need for cards to be present at all.
Michael Chui, a partner at the McKinsey Global Institute, says that RFID, sensors and other technology is vastly changing the checkout experience. In a 2014 NRF article he says that, “When checkout is working really well, it will feel like stealing. You grab a pair of shoes and you just walk out.”
Indeed mobile payments, as noted in a Demandware report on the Democratization of Retail, points out that mobile payments are transformative even in their infancy, and are expected to grow exponentially. In North America, the number of shoppers using mobile payment is expected to surpass 75 million this year.
Will more than 75 million Americans have EMV cards by the end of this year?
Lastly, in an era of secure, flexible cloud computing the idea of a tiny computer chip on a dip-able card strikes me as rather quaint, if not completely outdated. Will consumers (who have been trained to swipe or insert and quickly remove cards) get used to inserting their card into a reader, and leaving it there for several seconds until it is processed?
The wholesale transition to chip-enabled cards will take some time, as retailers weigh the significant costs of implementing new hardware and software vs. their potential liability.
And while they are weighing the costs of implementing 20-year old technology, shopper tastes march on.