According to the spring 2018 market snapshot from the U.S. Payments Forum, EMV chip adoption continues to spread throughout the U.S.:
96% of Visa payment volume at the point-of-sale is made using chip-enabled cards.
59% of point-of-sale locations accept chips, representing 578% growth since the EMV liability shift in October 2015.
Counterfeit card fraud for chip-enabled merchants has seen a 70% decline.
91% of U.S. ATMs are now EMV-capable, with 86% accepting chip-on-chip transactions — a significant improvement from 19% and 58% in 2016 and 2017, respectively.
With the rollout of EMV chip technology now well underway in the U.S., attention is turning to a natural next step: contactless EMV payments through both cards and mobile devices. The groundwork is already in place. According to Mastercard, nearly 800,000 unique merchant locations were already contactless-enabled by the end of 2017. And with some of the big players in the transit space — the Metropolitan Transportation Authority in NYC and the Massachusetts Bay Transportation Authority in Boston — in the process of rolling out contactless payments systems, consumer behavior will begin shifting quickly.
To better understand the likely trajectory contactless EMV will take, let us take a closer look at the strategy for merchants and issuers when it comes to rolling out the technology, and considerations for credit unions surrounding implementation:
Dual Interface Cards
Issuers utilized the contact chip card process for initial EMV deployment as it seemed to be the most convenient method for the cardholder. Most merchants had not yet enacted their EMV terminals for NFC (Near Field Communication), and contact cards were widely considered to be the best from an issuance standpoint to minimize cardholder confusion with the new process.
Fast forward to today, and more and more terminals are providing contactless payment activity through mobile wallets like Apple Pay and Samsung Pay. This trend has issuers rethinking their strategy of contact card issuance and beginning to consider dual interface cards. These dual interface cards provide cardholders with the ability to process a contactless EMV transaction if the terminal is enabled with contactless EMV technology; and if not, the cardholder can just insert the card and use it as a traditional EMV card.
If there are more cards offering contactless functionality, along with more terminals enabled with the current mobile applications in the market, we will eventually begin to see a shifting tide in terms of faster adoption of contactless and mobile payments.
One of the biggest considerations leading up to the EMV liability shift was consumer education. It was essential to make sure credit union members understood the reasons for implementing the new technology, and most importantly, how it affected them.
The same will be true surrounding contactless EMV. Proactively answering questions about why contactless technology is being implemented, who it benefits, and how to use it will be essential to ensuring as smooth a transition as possible and providing a seamless experience for members.
What should credit unions be considering as they move forward?
The issuance of dual interface cards should be part of an overall digital strategy that encompasses mobile applications like Apple Pay and Samsung Pay, wearables including Fitbit and Garmin, and online applications such as Visa Checkout and Masterpass. Is there a clear and concise plan to ensure consumers have a positive experience using the application of their choice, with the credit union card being readily available in all of them?
Credit unions need to manage their card stock if they are moving to dual interface cards. What is the timeline for deployment of dual interface cards to the membership base? Will the credit union go with a natural reissue or mass reissue? Credit unions should start thinking about how to get contactless cards into members’ hands as soon as possible in order to remain top-of-wallet when consumers and merchants began quickly adopting contactless payments and not be left playing catch up.
Over the last few years, cardholders have been transitioned from a “swipe” to an “insert” to now a “tap and go” process. Having a marketing plan in place geared toward educating both credit union staff and members about the differences and benefits of a dual interface card versus a contact EMV card is a necessity. A strategic marketing plan should take the timeline for deployment and overall digital strategy into consideration. Is there an incentive for changing over earlier to dual interface cards? Can cardholders be encouraged to use their credit union card for setting up monthly automatic payments or as the card of preference for mobile wallets and online payment options like PayPal and Amazon? Credit unions should consider utilizing a strong rewards program tied to a card to incent members. A quicker transition to dual interface cards will be more advantageous for the credit union from a card replacement and income (transactions from automatic and mobile payments) standpoint.
Dr. Arthur (Art) Harper is part of the EMV team at PSCU, the company that is certified and was the first to issue credit, debit and prepaid EMV cards in the credit union market. He has written several articles and educated credit unions across the country through internal and external webinars, EMV roadshows and one-on-one meetings. Art represents PSCU and the credit union industry on the U.S. Payments Alliance board.