CHICAGO -- In payments politics, it's difficult to imagine a topic that gets the blood flowing more than the EMV chip-card shift in the U.S.
As the switch to chip cards and the accompanying liability shift in the U.S. nears its one-year anniversary, the international method to thwart counterfeit fraud at the point of sale continues to have its vocal supporters and detractors.
Supporters point to a decrease in fraud and EMV's role in preventing fraudsters from presenting fake cards at the physical point of sale, while detractors contend chip card technology is old and simply pushes fraud to other channels.
"EMV as predicted, has been a challenge for some merchants, but what we have seen is fraud at the point of sale lowering by 27% in a year for those with EMV, and those who are delaying EMV, fraud is rising," said Hitesh Anand, vice president of commerce and enablement in mobile for terminal manufacturer Verifone Systems Inc., as part of a panel of experts Aug. 31 at the annual Mobile Payments Conference discussing EMV's highs and lows.
The EMV liability shift took place on Oct. 1 in 2015 for retail merchants, and will unfold at ATMs next month and gas stations in 2017.
Consumers may not be concerned about the fraud liability, but issuers with EMV can more readily assure those consumers that it is far less likely that they will be contacting them every two months or to issue a new card because of suspected fraud, Anand said.
Even though it hasn't been an issue in other parts of the world because consumers are used to chip transactions taking longer than swipe transactions, the U.S. migration will benefit from the advancement of the card brands' Quick Chip technology that will decrease transaction speed from more than 10 seconds to about two seconds, Anand added.
Detractors say the decrease in fraud at the point of sale has simply resulted in the expected uptick of e-commerce fraud, resulted in a confusing chargeback flood, and essentially represents a major expense for merchants being forced to invest in old technology.
"We all know that EMV is a state of the art technology specifically designed to solve certain problems we face in our payments system, and that would be true if it was 1995 in Europe," said Rich Stuppy, chief operations officer of fraud-prevention technology provider Kount, somewhat tongue-in-cheek. "This is a repurposing of a set of tools and techniques, obviously interoperable, but it literally is from the last century."
Going further, Stuppy essentially said EMV was jammed down merchants' throats.
"I think EMV was a massive case of the golden rule, or those with the gold make the rules," Stuppy said of the card brand initiative. "The merchants were basically conjoled into doing it."
Anand disagreed, saying the benefits of EMV are clear to the merchants. "Most terminals today are future-proofed with NFC and the ability to accept coupons on contactless mobile payments," Anand said. "EMV is not the only piece of security, but i t is very useful."
In the U.S., a card holding customer is not liable for fraud, but in other countries, the customer may be liable or the merchant is liable, so they seek the best security, which helps take some of that burden off the banks and provides better protection at all levels, Anand added.
None of the arguments presented were new, but the fact they haven't changed much in a year's time indicates EMV will likely be a hot-button issue in the U.S. for years to come.
Jacob Bennett, vice president of risk and underwriting for National Merchant Association, admitted the EMV shift in the U.S. has "been a little slower than everyone expected."
But in operating as an independent sales organization has allowed National Merchant Association to see some benefits from EMV that others might not.
"It has been a great opportunity from the processor perspective to re-engage with merchants or obtain new merchants and discuss fraud," Bennett said. However, the biggest drawback for EMV remains to be the difficult task of getting a merchant "excited" about the change, he added.
"A POS solution has to solve a pain point a customer has, and if that isn't the case, merchants are not as interested," Bennett said. "They want to protect themselves, but if it doesn't help the customer, they aren't as interested."
In the meantime, many merchants remain confused and frustrated over the amount of chargebacks occurring since the liability shift. The card brands have established chargeback thresholds, so banks will continue to handle and absorb some lower-value transaction disputes and limit the number of chargebacks a merchant not yet using EMV will handle from a single fraudulent card account.
"We have seen a huge uptick in chargebacks as a whole since the shift," Bennett said. "I think the last number I saw was a 35% increase. Issuers having to deal with a new process and new reality of chargeback implementation and dispute management led to a bit of an increase."
Some of those chargebacks can't be pinned on EMV, Bennett added. "The U.S. card holders are a little more savvy in how chargebacks and disputes work, and that has increased the friendly fraud factor in those disputes as well."
Anand also pointed to the PIN vs. signature debate in the U.S. chip shift as "something that hasn't gone well" mainly because it just creates confusion for consumers.
That debate has been so contentious that it has become the foundation of Walmart's recent legal battles with Visa.
"That could have been managed much better in my opinion," Anand said. "Mostly what we see now is that the smaller banks are using PIN, the larger banks are using signature."
Various industry research has illustrated the benefit of PIN as well as questioning the cost of deploying PIN vs. the amount merchants would save by stifling lost and stolen card fraud.
But to Kount's Stuppy, EMV's "biggest surprise" is the fact that merchants and others spent so much money and time to implement a technology "that came out at about the same time as 'Ghostbusters.'"
Merchants who have paid for it are benefiting from EMV, but "it is not surprising that we are seeing, essentially dollar for dollar, or maybe more, fraud in all of the other channels," he added.