It is no understatement to say that the journey to US EMV migration over the last decade has been bumpy, with several false dawns – yet a new report Driving EMV migration in the USA shares some very interesting insights into the current state of play.
The arrival of the shift in responsibility for revenue losses from chargebacks in October 2015 however marked the beginning of a long anticipated step change, with the majority of large retailers, issuers and acquirers enabling chip card payments at the check-out.
EMV technology has proven to be a powerful weapon in the war against fraud at the checkout, and in helping merchants protect margins already under pressure from online price competition. Wherever it has been implemented.
For the United States – the last big country to switch – it also offers much more than that. Chip card transactions have the potential to restore consumer trust in the payment process at the checkout while giving the incumbent payment industry a valuable opportunity to re-state its commitment to delivering a secure, innovative payment market, immune to external economic factors.
At the same time as installing the final piece of the ecosystem to build an integrated omnichannel retail marketplace that is not confined to national borders. Squaring the Circle: Driving EMV Adoption in the USA , reveals that while the approach to migration across the US during the first six months after the 2015 liability shift has been highly fragmented, the path to implementation should now be much smoother.
However, while survey respondents were universally in agreement that fraud reduction is the primary goal of EMV adoption, realizing an EMV dividend of higher transaction volumes against lower losses from fraud will depend on coherent, consistent collaboration between all corners of the payment industry square. It is this ‘last mile’ that will test the transformative capacity of the incumbent industry before the digital payment era fully takes shape.
Chargebacks, consumers and emerging risks: Over 90% of respondents to the survey identified fraud prevention as the primary target of EMV implementation. Card fraud topped $8.5 billion in 2015 and the research reveals the breadth of new and emerging risks confronting payment service providers today. Among consumers, a series of bruising data breaches, rising perceptions of fraud and falling in-store sales mean safer chip transactions provide main street retail with a much needed shot in the arm to reassure consumers that their payment data is in safe hands.
Innovation: The disruptive innovation agenda is dominating the shake-up in delivery of financial services across the US, especially among the payments industry, where new digital entrants are challenging the four party payment model that has determined the payment process for the last half century. 80% of respondents to the survey believed that introduction of EMV would also speed up adoption of contactless payments by merchants. The research underlines that while EMV is no panacea for flagging business models, it does provide valuable breathing space for the incumbent industry before the digital payment era fully takes shape.
Re-connection and retention: Data breaches and a reputation tarnished by the impact of the banking industry-induced Great Recession have fractured the consumer relationship with the payment system and their financial service providers. Safer chip payments offer an opportunity to repair the damage before the eyes of the consumer, as well as the potential for retailers to claw back some of the in-store retail sales that have been lost to online merchants over the last decade.
Collaborative competition: The value of EMV goes far beyond reducing fraud at the checkout. As one interviewee remarked, a mag stripe card declined abroad, stays out of use at home. Among survey respondents the perceived complexity of the certification process (75%), the need for merchant education and training (60%), and making the business case for EMV to merchants (64%) were cited as major obstacles to EMV migration. The research identifies a need for coherent cooperation to educate and promote the benefits of EMV, and underscores the value of bundled technology packages and simpler platforms to ease the transition process.
Limited liability: The liability shift has provided useful stimulus for EMV adoption in the absence of (an unwanted) regulatory mandate. Reliance on the avoidance of liability for fraud losses as the primary benefit of chip card payments however risks overlooking an opportunity to repair a damaged consumer relationship, inspire payment innovation at the checkout, and for incumbent providers to play a lead role in the growth of the payment marketplace.
Every Migration adds Value: Much more than a convenient sentiment, insights from interviewees and the survey reveal the cumulative nature of the EMV migratory process as it sweeps across the US retail landscape. Good progress has been made so far – close to one million retail locations are now EMV ready, a figure growing at 4 to 5% a month. Amplification of the benefits of chip transactions, and the realization of an EMV dividend of rising transaction volumes and declining fraud, however will rely on all corners of the payment square contributing to a virtuous EMV adoption circle to help complete the last mile.
Download Driving EMV migration in the USA