Experts are wondering if the United States can meet the deadlines the card brands have set for converting to EMV chip cards from magnetic stripe cards.
“The magnitude of the EMV transition here in this country -- it’s just mind-boggling,” says Gregg Smith, co-founder of the EMV Academy Inc. in Toluca Lake, Calif. “You have to ask yourself: Can this really be pulled off by everyone that fast?”
Visa Inc. has mandated that processors and sub-processors have the ability to process EMV transactions by April 1, 2013. In October 2015, liability shifts from card issuers to merchants if the merchant processes an EMV transaction on equipment that does not comply with EMV standards.
Some observers take comfort in the fact that the U.S. is the last of the G20 nations to adopt EMV standards for smartcards. The industry here can benefit from the experiences of chip-card pioneers in other countries, they note.
But some of those pioneers warn that the U.S. seems unlikely to have an easy time of it.
The U.S. has many more merchants and cardholders than such countries as Canada and the UK, making the EMV conversion a bigger job, Smith maintains.
Moreover, the U.S. financial transactions market is far more complex than its Canadian and British counterparts, Smith says. Canada has six major banks. By comparison, the U.S. has more than 7,200 FDIC-insured institutions and more than 7,500 credit unions.
To make matters worse, the U.S. also lacks those countries’ resources for accommodating EMV -- from EMV equipment testing firms to EMV educators, he asserts.
“I don’t know that there are going to be enough resources around then to handle this in a country of this size,” Smith says.
Not enough of the nation’s ISOs have EMV on their minds, he contends. Most of their websites fail to mention EMV, and many are still offering old mag-stripe terminals, he says.
Dave and Wendy Maisey of ICC Solutions Ltd. witnessed firsthand the push and pull of chip card adoption in the UK and Canada. Now, with offices in the UK and Atlanta, their firm provides EMV test and certification products and has focused on the Canadian market for the past six years.
“With the complexity of EMV, it will simply be too much for some organizations,” warns Dave Maisey, ICC CEO.
Procrastination over EMV readiness could put ISOs at a disadvantage with their clients as deadlines near, notes Wendy Maisy, ICC customer relations director and board member of Advanced Card Technologies Canada, the government-backed organization charged with promoting EMV awareness.
Such was the case with large acquirers in Canada and the UK that lost merchant accounts when retailers transferred purely because of acquirer’s lack of readiness, says Wendy Maisey.
“If an acquirer is not being chip proactive, the merchant will walk and will find another acquirer,” she says.
Besides readying themselves for EMV, acquirers should convince merchants to accept the technology — particularly if the retailers have to pay for it, says Smith of the EMV Academy Inc.
“We’re now looking at a technology where you have to take your hands off the device and slip the card into the machine during the transaction,” Smith says. “One of the issues in the UK was people didn’t like that.”
By holding online and in-person seminars for merchants on those and other issues, ISOs can significantly speed the education and acceptance process, Smith says.
Before ISOs can teach merchants, however, they need to develop a firm understanding of the technology, says Jeff Myers, director of global marketing for Sunbury, Pa.-based Q-Card, a supplier of magnetic stripe test cards and testing equipment.
“It is significantly more complicated than mag stripe,” Myers warns.
ISOs need to make sure their acquiring bank can accept EMV transactions, or find someone who does, Myers says. They also should understand what equipment is necessary. The hardware a mom-and-pop storefront needs will differ significantly from that of a big-box retailer, he says.
Plus, timely adoption will prevent merchants from falling victim to fraud, says Randy Vanderhoof, executive director of the Princeton Junction, N.J.-based Smart Card Alliance.
If ISOs and their merchants wait until just before the EMV deadlines — after most of the other merchants have upgraded and provided additional security — then those remaining merchants could end up seeing their fraud cases increase, Vanderhoof says. And that will sour that merchant’s relationship with their ISO, he contends.