Here, we offer some answers to your questions about the status quo of the chip card transition.
Why is the checkout situation so patchy right now?
To understand this, it helps to rewind to Oct. 1. This was a key date in the migration to chip cards, also known as EMV cards. Essentially, as of that date, whoever had the outdated technology — either the bank that issued a card or the retailer that accepted it — would be held responsible for the cost of fraud. The industry called this the “liability shift.”
As a result, many card companies, payment networks and others had been hurtling toward Oct. 1 as a deadline.
However, many retailers ultimately ended up holding off on making the change because they were worried about the timing: The holiday season is the busiest time of the year for many, and they worried that activating chip technology during or right before that rush could confuse customers and, in turn, slow down checkout lines. So they put it off, preferring to take the risk of potentially being on the hook for fraud charges over possibly alienating harried shoppers.
The result was that there was a burst of chip activation before and around Oct. 1, and then a long lull. You can expect to see retailers turn more attention to this now that the holidays are behind them.
Also, experts said that some of the unevenness is simply because it’s still early days. There are 1.2 billion credit and debit cards that have to be reissued, and 8 million merchant locations that have to outfit checkout counters.
“No country has achieved anywhere near 100 percent EMV readiness at the time of the liability shift,” said Erik Vlugt, vice president of global product management at Verifone, which makes chip-reading equipment and software.
So when I see a chip card slot, and I’m told not to use it, what’s going on? Doesn’t that mean the retailer is chip-ready?
Not necessarily. Even if the hardware has been installed, the retailer might still be readying the software that powers it.
Mallory Duncan, senior vice president at the National Retail Federation, said some stores have been held up in their chip roll-outs by what’s known as the certification process, wherein a payment processor gives a retailer a green light that its software systems are set up to safely to accept chip cards.
“There were a lot of steamed merchants waiting for certifications in advance of the day” of the liability shift, Duncan said.
Jason Oxman, chief executive of the Electronic Transactions Association, said that he suspects retailers that didn’t get certifications in a timely manner might have simply waited too long to start the process.
“It’s like Christmas shopping,” said James Wester, a payment industry analyst with research group IDC. “If you complain because you put all your Christmas shopping off to the last minute and suddenly you find there are lines,” that’s partially a problem of your own making. Still, Wester said, “there is some credibility to the claim” that merchants were ready to switch but were stuck waiting for certification.
And beyond the certification issue, there are other reasons why a retailer might not be ready from a software standpoint, including customizing it to work with other information technology systems.
Okay. But eventually, every store will get on the chip card bandwagon, right?
Mostly, yes, especially the big chains. But there could be some holdouts, because there is no legal requirement to make the switch. Experts said that some merchants, particularly small mom-and-pops, could wait a rather long time to change to chip technology. These stores simply don’t experience as much fraud as major national retailers, so they might determine it’s not worth the costs of upgrading their hardware and software.
I’m finding that it takes longer to check out with a chip card. Is that the new normal?
Yes and no. As you’ve probably noticed, you must leave a chip card in the payment terminal for the duration of a transaction, rather than just a quick swipe. That’s not going to change.
What will change, said Catherine Murchie of Mastercard, is that you’ll get used to it. Once people grow accustomed to dipping instead of swiping, they are almost certain to make fewer mistakes, such as pulling the card out too early, and then the transaction should go smoother.
Scott Carey, the owner of Sump Coffee in St. Louis, switched to chip technology this fall at his independent coffee shop. He said he’s finding the evolution of customer reaction to be much like when he first started processing payments with a Square reader attached to a mobile device several years ago.
“We would go through this whole long speech, and it got to the point where they don’t need it anymore,” Carey said.
And while Carey joked that the added time turns checkout into something of an “exit interview,” he said he doesn’t think that’s such a bad thing: He feels like it creates more time for small shops like his to connect with customers.
Okay, that’s nice, but aren’t a lot of shoppers annoyed by the extra time this builds in?
Probably. According to survey conducted by Ingenico Group this fall, some 21 percent of U.S. cardholders who had used EMV said they felt the transaction took a long time. Experts say this could be a reason that customers and businesses are taking a closer look at migrating to mobile payment systems such Apple Pay or Android Pay, which offer speedier checkout times.
So how long will this transition take?
The payments industry projects it will have 98 percent of chip-enabled cards reissued by 2017. The major card companies are making steady progress toward that, but have a ways to go. Mastercard says that as of December, 59 percent of U.S.-issued credit cards and 23 percent of its debit cards are chip cards. Visa says 43 percent of its credit cards in the United States and 21 percent of debit cards were outfitted with chip by the end of last year.
Meanwhile, 70 percent of Americans have received at least one chip card, according to data from the ETA.
It’s a little harder to figure out the pace at which merchants will accept these cards. Verifone estimates that by the end of this year, 60 percent of its equipment in the market will be capable of accepting chips. But that doesn’t necessarily mean retailers will have the technology turned on.