The U.S. EMV migration is high stakes, complicated and probably won't get done on time to meet the deadlines set by the card networks, according to Vantiv's Patty Walters.
To avoid a shift in fraud liability, most merchants must be able to accept EMV-chip cards, which improve security over magnetic-stripe cards. Fuel merchants have an additional two years.
"There's 349 business days until the [October 2015] card network merchant liability shift deadlines, and the migration is a very large task," said Walters, Vantiv's senior vice president of merchant products and security, during the Cartes America conference this week in Las Vegas. "It's possible to get it done. I'm not sure if it can be done inside this 349 day timeframe, but it can be done over time."
There has been some progress, Walters said. The 10 largest merchant acquirers are EMV certified and about 2 million EMV-compliant terminals have been installed, but the scale of the U.S. market will make it hard to complete the migration by October 2015, she said.
Total System Services also predicts the EMV migration will extend beyond the deadline set by the card networks. Philip W. Tomlinson, chairman and CEO of TSYS, said at the company's May 13 analyst day presentation that it will take two to five years for most issuers to switch to EMV cards.
There are about 511 million credit cards, 572 million debit cards and 11 million payment terminals in the U.S., making for a more complex payment system compared to other nations, Walters said. "The U.S. market is unlike any market in the world that has had to move to EMV," she said.
In the four merchant categories Walters said are most vulnerable to counterfeit fraud (retail, supermarket, drug stores and gas stations), there are more than 2,500 certifications for Vantiv to perform.
"But we must do our best to get as many merchants certified and as many issuers in the market as possible and find a way from there," she said.
Randy Vanderhoof, director of the EMV Migration Forum, agreed that the migration will extend far beyond the October 2015 deadline.
"We're hearing the tail on the migration may stretch out five or six years. If we want to get fully EMV compliant, we're looking at 2019 or 2020 at this point," Vanderhoof said.
During her keynote address, Walters delivered an impassioned plea to move forward on the EMV migration despite concerns about the technology's cost and its lack of protection for card-not-present (CNP) transactions.
Counterfeit fraud creates hundreds of millions of dollars per year in losses, Walters said, citing data from an unnamed card brand that said counterfeit fraud increased more than 300% between 2004 and 2011.
"That counterfeit liability will become merchants' responsibility in October 2015 if they don't move to an EMV enabled environment," she said. "I would say spending hundreds of millions of dollars on hardware and software [for the EMV migration] is not too high a price to pay. This fraud is growing higher annually and will only grow more, the longer merchants wait to embrace the new technology."
Walters also addressed CNP fraud, but said this concern shouldn't deter migration.
"EMV is not a silver bullet I would equate it to owning a home that has two doors and not locking at least one of them," Walters said. "There are things moving forward to protect CNP fraud, but in my opinion there isn't a good argument to not move to EMV simply because it doesn't solve CNP problems. We have to fight the battles where we can."
To get on the path to EMV adoption, merchants should decide on a terminal and a strategy to migrate their point of sale systems; ISOs should assess the highest-risk merchants and work with their acquirers to develop strategies for upgrades and point of sale lease/purchase options; and issuers should be piloting and planning their migration, Walters said.
Vantiv is also pursuing opportunities for integrated payments, a driving factor behind its planned $1.65 billion acquisition of Mercury Payment Systems. Vantiv announced the deal May 12 and expects it to close in the second quarter of 2014.