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Retailers Slow to Adopt EMV Technology

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EMV chip cards gained a lot of momentum last year, and they have the potential to virtually eliminate counterfeit credit-card fraud at the point of sale, a crime that accounts for most credit-card fraud. As of the beginning of the year, over 70% of Americans had at least one chip card in their wallet.

Mobile payment applications like Apple Pay, Samsung Pay and Android Pay are becoming part of the retail landscape, yet it seems that while consumers are insisting upon different and secure payment options, some industry observers feel many retailers are dragging their feet and are implementing the new technology at a snail’s pace.

There are other reasons driving low activity and acceptance:

  1. Longer-than-expected timelines for debit EMB certification in 2015. Most merchants prefer consistent checkout processes for debit cardholders and credit cardholders.
  2. There are disagreements as to the reasons for lack of use during holiday shopping: It was claimed by lawmakers that some retailers turned off Apple Pay to protect their own proprietary solutions. However, many merchants delayed EMV transactions, claiming that they took several seconds longer than mag stripe, particularly when consumers and cashiers still hadn’t adjusted to the new transaction process.
  3. Low EMV awareness. While national chains were and are proactive in planning for chip cards, smaller stores often rely on merchant acquirers to supply new technology and educate them on new processes, so it will take longer for EMV to break through to smaller retailers.

Consumers want the ability to choose the payment methods that work best for them. In fact, new research from Morning Consult revealed that 82% of those surveyed believe customers should have a choice in what type of payment technology they want to use. Additionally, 75% of voters said stores and retailers should accept as many different types of payment technology as possible.

According to a new report from Boston Retail Partners, “Payment/Data Security in an Omnichannel World,” only 10% of retailers are performing EMV-enabled transactions that are working well, with another 12% saying their EMV-enabled transactions need improvement.

53% of retailers plan to implement EMV within 12 months. But, EMV adoption in and of itself doesn’t do anything to reduce the risk of a breach. What is required is the implementation of high levels of end-to-end encryption (E2EE) usage.

According to the Congress Blog published in “The Hill,” describing laws and policy, retail trade associations are mandating PIN authentication, a technology that is already becoming outdated. Recently, the National Association of Convenience Stores launched an advertising campaign calling for a PIN mandate.

While some retailers insist that PIN can somehow eliminate all fraud, that really is not the case. PIN’s biggest hurdle is that it’s a static data element, which makes it vulnerable to theft. Criminals are aware of that. A report by the Federal Reserve Bank of Atlanta found that debit PIN fraud rates more than tripled between 2004 and 2012.

However, it’s been reported that EMV activity (as a percentage of all transaction activity) is noticeable and steadily rising each month as more stores enable EMV. As the conversion continues in the U.S., retailers should stay focused to the mission to complete upgrades to their payment systems, which involves 500 million active general-purpose payment cards and an estimated 12 million payment terminals.

The longer implementation is delayed, the greater the risk of loss for financial institutions and stores that are late adopters of EMV technology. It is expected that stores who are slow to adopt EMV will be targets of more counterfeit efforts, as criminals will seek to exploit this shortcoming.

Nonetheless, EMV should have a significant impact on retailers’ technology activities in 2016, despite its small impact so far.

TAGS: retail trends, retail, loss prevention, retailers,
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