“Why are we using these slow EMV cards?”
We get this question a lot from businesses and consumers alike even years after the EMV liability shift. With this change, the major card brands (Visa, MasterCard, Discover and Amex) lifted the responsibility for fraudulent transactions off their shoulders and onto businesses’ for improperly swiped EMV cards.
The intent was twofold:
- Eliminate fraudulent transactions due to cloned cards
- Encourage EMV compliance by merchants
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Why Chip Cards Are Still Swiped In a Credit Card Chip Reader
It’s easy for consumers to take the importance of proper chip-card processing for granted. As of September 2016, only 44 percent of U.S. businesses were estimated to have a credit card chip reader — but fewer, still, can actually accept these payments: a measly 29 percent, according to an analysis by The Strawhecker Group. However, recent stats point to an increase in EMV adoption among U.S. businesses. EMVCo reported a little over 12 percent increase in card-present EMV transactions from 2017 to 2018. This means more businesses are properly processing these payments with a credit card chip reader.
But why are there still businesses failing to properly process EMV transactions even with a credit card chip reader? Some businesses have a credit card chip reader that features an EMV chip slot, but their providers aren’t certified to accept such payments, rendering the technology useless. That’s why shoppers regularly see their chip cards swiped, rather than dipped, at checkout.
This is an issue because magnetic stripe readers can’t process the unique code that chip cards generate to authenticate each individual transaction. Chip cards were designed to combat fraud; merchants who swipe these cards are essentially undermining that.
That’s the beauty of EMV chips, but also the reason for the awkward foot tapping and conversation customers and cashiers endure at checkout when processing EMV cards. The typical EMV chip transaction takes a whopping 16 seconds to process, according to an audit conducted by Field Agent, whereas traditional swipe card transactions are virtually instantaneous.
Cardholders don’t have much choice when it comes to chip-card adoption. As of 2016, 52 percent of American consumers had a chip card, according to EMVCo, and as of 2018 the cardholder adoption rate increased abou 8 percent. The card brands are issuing these cards to make fraud more difficult to pull off and stem the tide of related losses.
Why the Sluggish EMV Adoption?
Business owners have every reason to adopt this technology. Most we speak to know what the liability shift of October 2015 means for their businesses. That said, there are a couple reasons why merchants struggle to process EMV chip cards:
- Credit card chip reader are expensive. EMV-capable terminals can cost up to $1,000 on average, according to Bloomberg, and many businesses operate several terminals that would require replacement. With an estimated 15 million point of sale terminals requiring an upgrade in the U.S., the cost of complete EMV compliance is expected to reach $6.75 billion, according to CreditCards.com.
- Providers aren’t EMV certified. Even if the merchant adopts EMV-capable technology, as stated above, it means nothing if its provider isn’t EMV compliant.
- The merchant has never received a chargeback. Merchants might believe that, because they’ve never received a chargeback, the liability shift won’t affect them. But banks are now initiating chargebacks specifically when they spot merchants incorrectly processing EMV cards.
By adopting this new technology, and working with a provider that is EMV-certified, businesses can avoid bank-initiated chargebacks while protecting themselves and their customers from fraudulent activity. And it’s working: MasterCard reported a 54 percent drop in fraud from April 2015 to April 2016, according to DigitalTransactions. More recently, Visa reported 76 percent less card-present counterfeit payment fraud at the end of 2018 compared to September 2015.
Luckily, some providers, like PayJunction, offer incredible pricing on EMV-compliant and NFC-ready terminals. PayJunction offers qualifying businesses one free Smart Terminal when they send in two months of merchant statements to see how we can match or beat their rates, while equipping them with state-of-the-art technology.
Do you have an credit card chip reader? Does the chip functionality actually work? Start a conversation in the comments section, we’d love to hear from you!
Editor's Note: This post was originally published in October 2016 and has been updated for comprehensiveness and accuracy.