EMV looms in the US, are consumers ready?
As of October 1st, payment networks including VISA and Mastercard will shift responsibility for credit card fraud onto U.S. merchants who have not adopted the EMV standard as their primary method of credit card payment, instead relying upon the old magstripe. The move to EMV cards is intended to make credit card fraud less likely. While common in Europe and other regions around the world, the technology standard is just now being adopted in the U.S.
However, July figures released by Visa show only 18% of the 720 million Visa-branded credit, debit, and prepaid cards in the U.S. contained an EMV chip. Visa’s figures also indicate that about 295,000 merchant locations were enabled for chip card acceptance at the end of July, up 19% from the 247,000 at the end of June. However, despite these gains, support for EMV cards at the US’s approximately 8 million card-accepting locations remains low. Similarly, only about 7% of the estimated 535,800 bank and retail ATMs in the U.S. can now read EMV chip cards.
While retailers in the U.S. are being made aware of the changes, it would appear that a majority of consumers are still unaware. Harbortouch, a national POS system and merchant services provider in the U.S., published the results of a large-scale national survey investigating consumer awareness and usage trends of EMV or 'chip' enabled credit cards. The survey, fielded to nearly 18,000 U.S. adults in late August, found that 56 % of consumers are unaware of what an EMV or 'chip' credit card is. Obviously, the results point to the need for more consumer education on the transition from traditional 'swipe' credit cards to EMV or 'chip' cards, which will take place nationwide in just two weeks.
"The findings of this study indicate that EMV could pose serious challenges for credit card companies and retailers as the busy holiday season approaches," said Jared Isaacman, founder and CEO of Harbortouch. "Varying rates of adoption and opinions on the benefits of 'chip' cards means more can be done by all parties to ensure a smooth transition on October 1st and beyond."
The recent Harbortouch survey also investigated a variety of EMV usage trends among U.S. consumers who did report awareness of chip cards. Respondents between the ages of 18-24, also known as Gen Z, were the least likely to use EMV credit cards (20.5%). However, Gen Z reported the highest usage of mobile payments (42.1%). Interestingly, only half of consumers believe chip cards will make them more secure - While payment networks believe in the security benefits of EMV, only 50.8% of consumers feel the technology will make transactions more secure.
“If the October liability shift is significant for issuers and merchants in terms of fraud, it also offers a very exciting opportunity for NFC and contactless payment. Chip-and-PIN is being criticized in the US for being slower and less convenient that the current swipe-and-sign system. But for smaller value purchases it’s hard to argue that case with contactless. It’s fast, convenient and secure. And it’s been around in the US since 2005”, wrote Nicolas Raffin, President of the Smart Payment Association, last week.
“Adoption has been slow over the past decade – unsurprisingly due to the limited supply of terminals. But this looks likely to change fast. Apple Pay, Samsung Pay and others are certainly at low volume at present, but they’re brought the ‘cool’ factor to the concept of contactless payment. That’s good news for all tap-and-go payment types – the smart card included. Which is why we think that the opportunities of contactless card payment deserves greater attention. Currently the vast majority of coverage compares chip-and-PIN and swipe-and-sign, or looks at the app payment options. But as the US transitions to EMV, it seems strange not to go straight to ubiquitous contactless payment, and not to be encouraging greater take up from merchants, and indeed consumers.”
At least Samsung is seeing the opportunity that the introduction of Samsung Pay could bring to mobile payments if it is introduced to a larger consumer audience. Samsung Electronics mentioned that they may expand their mobile payment system to budget smartphones, and expected the number of its users to grow further down the road. Samsung Pay, officially launched in South Korea last month, is currently available for only high-end smartphone models released this year, including the Galaxy S6 and the Galaxy Note 5. "It will gradually expand," said Shin Jong-kyun, who heads Samsung's mobile business, when asked if the company plans to provide the service on cheaper smartphones. "The Samsung Pay service is going well, and I think more users will be able to use it," Shin said after a meeting of Samsung Group presidents.
While Samsung's latest payment tool can reach out to a significantly larger scope of shops than other rival services, such as Android Pay and Apple Pay, on the back of its magnetic technology, it has been facing limits in expanding the number of users as it only works on pricy models. Samsung Pay's magnetic secure transmission (MST) technology allows users to make payments through traditional credit card devices. The breakthrough may well give the payment service the upper hand compared with other rivals, which only support NFC.
Perhaps the US may provide a fertile catch-up market for Samsung during this EMV transition period from swipe to Chip & PIN? Current surveys, at least, indicate that there is tremendous opportunity if grasped quickly enough.
Until next time,
Steve Atkins
Contactless Intelligence
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