EMV in the U.S: The picture six months in – Part 2
EMV implementation – the side effects
Migration of fraud
Although the US at one time had only 25% of the world’s card payments, it has consistently accounted for ~50% of total global fraud, dating back to 2003. A primary driver of this was the absence of EMV in the US. With EMV now rolling out, and shoring up fraud prevention capabilities for card present channels, conventional wisdom tells us that fraud will move to eCommerce / card-not-present (CNP) channels. ACI has observed this trend in other markets, including the UK and Canada, post-EMV conversion.
Merchants whose payment portfolios include eCommerce now need state-of-the-art fraud solutions, to combat the increased exposure and risk of card-not-present transactions as the US payment landscape finally gets its makeover.
Increasing CNP fraud is not the only area of concern. As US merchants work to support EMV acceptance and fight fraud, the liability shift that occurred in October 2015 means that card issuers can now throw chargebacks on EMV-enabled cards back to the merchant. Much to their distress, many merchants are now experiencing 20 – 30 times more chargebacks than they were seeing pre-EMV.
At ACI, we have also observed consumer education challenges once EMV is implemented. By default, EMV transactions take longer than mag-stripe transactions, because of the multiple data exchanges that need to occur during an EMV payment authorization. Moreover, the POS checkout time can be severely impacted, as consumers adjust to a very different user experience.
This can mean longer queues, increasing wait times for customers or requiring additional investment as merchants add staff to reduce queue length. Over time, this problem will reduce, as consumers become accustomed to the chip-enabled card experience – and EMV-enabled merchants can expect to see increased customer satisfaction and loyalty in the long-term, as their customers come to appreciate the security advantages of EMV.
Once the EMV rollout and conversion is complete in the US, EMV certifications will be here to stay, requiring a new certification for every meaningful change in the merchant payment solution.
A payment terminal upgrade, a new payment feature/offering, or any major payment software upgrade will mostly require EMV certification. In anticipation, merchants should ensure they plan their payment innovation roadmaps carefully, and keep open lines of communication with their technology partners.
To minimize cost and shorten implementation timelines, they should also invest in training, to maintain their EMV technical knowledge and understanding of the requirements.
The next big EMV conversion will be for pay-at-pumps terminals, from October 1, 2017. While this segment has its particular challenges, learnings from the in-store terminal conversion will hopefully make it a much smoother experience.
We are already seeing some innovative initiatives that try to alleviate some of the challenges – such as the CopperLink Ethernet Extenders designed to help merchants avoid digging up pavement to install CAT5 network cables.
Moreover, fueling and convenience merchants are already starting to plan and engage - and early planning and engagement is a sure way to succeed.
The US has finally joined the EMV club and will be adding more than a billion cards to the EMV cards in circulation globally.
Conversion and adoption since the liability shift have been challenging, but we are now seeing a lot of momentum in conversion; we expect most EMV conversions to be completed before the end of 2016, with only a handful trickling into 2017.
With this comes the anticipated shift of fraud to the eCommerce channel, and a strong fraud solution is going to be as important as EMV for merchants with eCommerce in their payment portfolio. Merchants will need to continue to stay in lock-step with their payments and fraud technology providers to ensure their systems are ready to adopt and adapt to the new EMV world.
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