EMV-chip cards might take until 2018 to reach full ubiquity, and a lack of education about the technology is hindering adoption, according to a new report from Javelin Strategy & Research.
"One of the biggest takeaways or suggestions based on the research is that someone really needs to take the reins on the education side," says Nick Holland, senior analyst for payments with Javelin Strategy & Research, and co-author of the report.
Javelin's projection falls way past the October 2015 deadline set by the card brands. After that date, fraud liability shifts to the party unable to service EMV transactions (fuel merchants have until October 2017 until they face a liability shift).
"It is a little shocking that, with such a short period here before the transition happens, nothing really seems to be done cohesively to educate the consumer and merchant as to what is going to be happening," Holland says.
All of it has left the industry short on its learning curve, especially for those who need the education the most. But it remains unclear whether the card brands, banks or another organization like the EMV Migration Forum or the PCI Security Council can unleash an educational campaign with national reach.
In the U.K., which had a migration deadline of 2005, education was a more straightforward proposition, Holland says.
"The country was behind [EMV]," Holland says. "It was a very consistent kind of media drum beat informing consumers and merchants for the 18 months to two years before it happened."
Educating consumers will be difficult in the U.S., especially since card issuers are divided on whether to offer chip-and-PIN or chip-and-signature authentication.
Retailers are also in need of education, as far too many remain unaware of the EMV technology or the looming liability shift, Holland says.
Javelin interviewed card issuers and manufacturers, networks, processors and technology vendors from December of 2013 to March of 2014 to compile a report on EMV readiness in the U.S. Javelin also surveyed 213 small businesses and more than 5,600 consumers about fraud.
Retail establishments with fewer than 20 employees represent 58% of U.S. retail establishments, but this segment will not exceed 25% readiness by the 2015 timeline, the report states.
Much of the report also indicated that issuers were holding back because of longstanding uncertainty over debit routing technology. But this issue has been largely addressed since the surveys took place, with the debit networks and card brands reaching a series of licensing agreements over the common application identifiers (common AIDs) needed to route debit payments.
"Parts of the report had to make a 180-degree turn because of the way things were changing so quickly," Holland says. "The planets are aligned around the common AID and that problem is fixing itself faster than anticipated."
The research also began prior to Target's holiday-season data breach being made public, which Holland called a "game-changer" in putting more focus on EMV. Target said in February that it would fast-track its EMV program, and in April Target announced plans to offer chip-and-PIN credit and debit cards from MasterCard.
Even though EMV smart cards would not have prevented the Target breach, the incident "moved the conversation to a national and governmental level and invigorated both Visa and MasterCard to keep the October 2015 date on the calendar," Holland says.
The research also estimated that physical EMV cards and terminals would cost issuers and merchants more than $6.8 billion in the U.S., with issuers paying 62% of that cost.
In addition, Javelin forecasts that 166 million EMV credit cards will be circulation in the U.S. by the end of 2015, representing 29% of the eventual total. For EMV debit and prepaid, 105 million cards will be issued, or about 17% of the expected total.
Based on those numbers, Javelin concludes that it will take until the end of 2018 for "card ubiquity" in the U.S. when 96% of credit cards and 98% of debit and prepaid cards will be EMV chip-based cards.