More financial institutions are working to issue EMV chip cards while merchants are dropping bills to install the proper terminals before certain liability-shift deadlines arrive. But as this transition finally reaches consumers, some may adopt habits that negate the benefits the EMV standard provides.
The EMV standard improves security by storing payment data in a secure chip on the card. In the U.S., the card networks are urging a transition to EMV by promising to shift fraud liability to the entity that has the weakest security in place.
Even with the first of Visa Inc.'s EMV incentive dates passing this month, "most consumers aren't aware of [EMV]," says Robert McMillon, vice president of global security solutions at Elavon Inc.
Consumers may not be concerned because even with less secure magnetic-stripe cards, "the credit card industry has done a great job of making the negatives of using credit cards almost non-existent," McMillon says.
Though U.S. issuers are not required to use PINs with EMV cards, some card networks are encouraging PIN use through their liability policies. Using a PIN would add a step to the payment process for many consumers, and some may be tempted to take shortcuts such as writing their PIN on the back of each card.
If consumers are not careful with their PINs, issuers may seek to pin the blame on consumers for fraud that occurs with EMV cards.
McMillon likens the situation to the years when identity theft started to pick up, and it was widely assumed that the consumer was somehow negligent. Consumers whose identities were stolen went through an expensive – usually around $10,000 – year-long process to get their credit cleaned up.
Today, there are more resources for consumers and a greater level of understanding from banks. If a consumer's identity is stolen today it may cost about $10 and take approximately 30 days to set right.
EMV technology would not eliminate the issue of "friendly fraud," wherein a consumer seeks a refund by disputing a legitimate transaction, says Randy Vanderhoof, executive director at Smart Card Alliance.
"In the U.S., we have [the] precedent of banks issuing cards with PIN protection … yet consumers are still reimbursed if they claim fraud, so I would expect that it would be no different for EMV cards with or without PIN," he says.
To educate consumers about how to properly protect their accounts, Bank of America sends an informative insert about EMV technology and how to use it when it distributes EMV cards, says Betty Reiss, a spokeswoman for the Charlotte, N.C. company. Merchants, Reiss says, are familiar with the technology already.
Natalie Brown, a spokeswoman for Wells Fargo, says educating consumers and merchants is an industry-wide effort.
The EMV standard has already been adopted in 22 countries, including most of the European Union. In many cases EMV cards are used with a PIN for added security.
Wells Fargo offers both chip-and-signature and chip-and-PIN variants of its EMV card. Bank of America and JPMorgan Chase offer chip-and-signature cards.
Bank of America "decided on chip and signature for our consumer cards so customers can continue to sign for purchases just as they do today," says Reiss. "It's a matter of ease of use."
JPMorgan Chase issues chip-and-signature cards so its customers do not have to remember another PIN code and because it's the most universally accepted, says Rob Tacey of Chase card services communication and public relations.
Even though signature-based EMV cards are harder to counterfeit than magnetic-stripe cards, "the main reason for moving to EMV is the increased fraud protection and that's only available with PIN," Elavon's McMillon says.
Elavon, a US Bancorp subsidiary, wants to be at the forefront of this new technology. The processor recently announced its chip-and-PIN MobileMerchant smartphone payment system in Ireland. The announcement came after a successful launch of the product, which transforms a mobile device into a payment terminal, in the U.K. in January.
Elavon is looking at the U.S. as its next target. The company hopes to add the chip-and-PIN and chip-and-signature variants of EMV to the North America version of its product, VirtualMerchant Mobile, shortly after the April 2013 EMV deadline for acquirer readiness.
"Adding EMV support allows us to continue to take advantage of the security benefits of EMV and move along with the next evolution of payment platforms," McMillon says.
Consumers won't have any problems adopting the new payment standard because they're quick to adapt to new payment systems once they're deployed, Vanderhoof says.
"Consumers won't really be aware of the impact or repercussions until it hits them directly," he says.