Six months after the liability shift for non-chipped cards, the dust is far from settled over EMV implementation, availability, and effectiveness.
Issues include low implementation at point-of-sale, chargeback conflicts, and consumer confusion and impatience with waiting 10 seconds or so once a card is dipped. There’s even a lawsuit seeking to become a class action that accuses the card brands and big banks of unfairly forcing fraud-related expenses onto small merchants.
“The reports we’re hearing from our credit unions is that it’s a bit of a Wild West out there as far as what you are going to run into,” Michelle Thornton, card product development director at CO-OP, told Credit Union Times.
That’s because cardholders are encountering a mix that includes pre-EMV machines and EMV-equipped terminals that either aren’t actually reading the chips or are requiring a PIN instead of signatures.
Information and education can help solve that issue, says Art Harper, director of solutions consulting for payment card and plastics at PSCU. He tells CreditUnions.com that a major challenge right now is getting updated lists of EMV-compliant merchants that processors can provide issuers to help educate consumers.
Of course, shoppers will know the terminal is compliant if they’re told to dip instead of swipe their card. (Even that has generated reports of concern over the time it takes while the card is read and the transaction is authenticated.)
Complicating matters: While chip-and-signature is the U.S. standard for credit transactions — instead of the PIN typically required abroad — it’s not always the same for debit. “One issue that we are fast becoming aware of is that some merchants are not providing EMV debit cardholders the signature CVM option,” Harper says. "They’re being prompted for PIN only, which presents a less-than-favorable consumer experience.”
Another major credit union card processor, meanwhile, says so far so good. “TMG is not experiencing any availability issues,” says product manager Chole Casber.
And time should heal all wounds. “It’s as we all predicted. It’s going to take a while,” says CO-OP’s Thornton. After all, payments processing is a multi-channel, multi-platform, multi-stakeholder affair.
Just ask Carlton Howard.
Maybe This Is Rocket Science
“It’s too early in the game to draw any conclusions or paint anyone as the villain,” says Howard, vice president of cards and digital payments at Coastal Federal Credit Union ($2.6B, Raleigh, NC). “Our payments arena is a multi-sided economic platform and its inter-relations are incredibly complex.”
Howard says merchants, issuers, card brands, and consumers alike need to work together more to push deployment and adoption numbers that many have deemed anemic.
“Until there is more saturation on both sides, I wouldn’t expect to knock anyone’s socks off. Payment systems don’t reach critical mass without ubiquity,” he says. (A recent article in USA Today says only 37% of businesses are now processing debit and credit chip cards.)
And it appears the whole point of EMV is slowly being met. “It’s not a magical destroyer of fraud, but it does make counterfeiting cards harder to do and more importantly, it helps lay the groundwork for tokenization, which has real value in protecting everyone,” Howard says.
Money already is being saved, depending on whose cash register you’re guarding. Harper at PSCU says one of its owner-issuers has saved more than $1 million since it deployed EMV a few years ago. That raises another thorny issue: chargebacks to merchants. After all, the liability shift was meant to place the financial responsibility on the weakest link in the transaction chain.
PSCU says it has processed more than $2.3 million in EMV fraud chargebacks for its member owners since the liability shift last October. TMG, meanwhile, says it has seen a marginal increase in chargebacks, coinciding with merchant data breaches and not appearing to correlate with EMV adoption.
“We’ve also seen steady growth in CNP (card not present) fraudulent activity, which would validate our previous prediction of the migration of fraud post-liability shift,” says TMG fraud prevent manager Ashley McAlpine, who expects counterfeit card activity to decline as more of TMG’s portfolio is converted to EMV. (It’s now at 34%.)
So, going forward, credit unions should probably just proceed as normal. His is, says Howard at Coastal. “Anytime a consumer claims fraud, the appropriate response is to exercise your chargeback rights and rules. This has always been so, so that's nothing new.”