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EMV migration needs acceleration, payments forum says

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Inside the Beltway
Friday, February 17, 2017

The U.S. Payments Forum recently highlighted progress U.S. merchants have made in the migration to EMV chip payments, but also stressed its belief that there is an urgent need to accelerate the process for the sake of further limiting counterfeit card fraud.

U.S. Payments Forum Director Randy Vanderhoof said in the forum’s winter 2017 market snapshot that card fraud is “the largest source of fraud in the U.S.”

The snapshot also addresses the forum’s priority on securing card-not-present (CNP) mobile and online channels, as well as a list of resources merchants can utilize for guidance for implementing and optimizing EMV technology.

Nine in 10 Americans currently use chip cards regularly at roughly one-third of U.S. merchant locations equipped to accept chip payments, according to the snapshot. It also states that “an estimated 79 percent of ATMs will have completed the migration by the end of this year.”

Vanderhoof acknowledged the steady growth of chip payments by volume while also stressing the need to further speed up growth to achieve the goal of eliminating card fraud. The snapshot pointed out the forum’s focus on developing programs for outreach and education geared toward “merchant segments that have unique and/or challenging migration paths,” such as those in the ATM, petroleum, transit and hospitality industries.

The forum has formed a Petroleum Working Committee with a focus on helping the petroleum industry identify and resolve issues encountered during the implementation of EMV chip technology, as well as providing educational outreach programs for merchants and technology providers that service the industry.

“The unique challenges facing the retail petroleum industry in upgrading their outside pay-at-the-pump systems to EMV have been an active part of the EMV migration discussions over the last year within the U.S. Payments Forum and its Petroleum Working Committee,” Vanderhoof said. “After the policy modifications were announced late last year, there were some misconceptions they may cause the petroleum industry to delay their migration plans. But what we’re really seeing is that the petroleum industry understands that they need to ‘put the pedal to the metal’ and use this extra time to complete the hardware and software upgrades at the pump to make sure their outdoor environments are enabled to accept chip as quickly as possible to avoid fraud risk.”

American Express, Discover, MasterCard and Visa each announced near the end of 2016 that they would push back the effective dates of their respective EMV fraud liability policy changes pertaining to the petroleum industry from October 2017 to October 2020.

Despite the benefit of reduced fraud liability presented by EMV technology, some merchants have been resistant to migrating because of fear of increased fees. According to an article published by the Chicago Tribune in May 2016,  a report by Crone Consulting showed some merchants saw “debit-transaction fees increase by about 20 percent since Oct. 1 (2015), the deadline by which most stores were supposed to start accepting chip cards or face some fraud liabilities.”

Another ongoing hurdle facing EMV technology is compliance with Dodd-Frank’s Durbin Amendment, which requires merchants to offer no fewer than two options for routing transactions. Although some processing companies and vendors have upgraded client terminals with software designed to steer transactions to the least-expensive debit networks, the choice often is preset, with shoppers typically being asked to select options such as “Visa debit” or something less familiar to them such as “U.S. debit,” according to the article. Shoppers are more likely to choose the more familiar option, which, in this case, would be Visa, which then would prompt them for a signature rather than a PIN. This type of transaction can cost a merchant between 1 percent and 2 percent when a card is issued by a smaller bank.

Regarding the CNP environment, the forum created the Card-Not-Present Fraud Working Committee and Mobile and Contactless Working Committee, tasked with developing a list of best practices and educational resources about securing mobile and online channels.

“The industry has shown a high level of focus and urgency towards securing the in-person payment channel with EMV chip payments, and it is absolutely critical that the payments industry continue to simultaneously devote the same level of energy to work to avoid fraud increasing in the card-not-present channel,” Vanderhoof said. “With our expanded focus and unique mix of payments stakeholders, the U.S. Payments Forum is in the position to provide the actionable implementation guidance that the industry needs to create successful multilayer fraud reduction programs and close off these channels to fraudsters.”

The forum also is launching projects intended to address issues that arise during the implementation of mobile payment technologies, “taking an inclusive cross-industry view to address issues that impact multiple stakeholders,” the snapshot states.

The U.S. Payments Forum is a cross-industry body focused on deployment of new and emerging payments technologies in the U.S. It has provided guidance for EMV implementation since the migration began in 2012. 

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