The switch from magnetic stripe credit and debit cards to chip-enabled ones was always going to be more marathon than sprint: Millions of new cards must be manufactured and distributed, and any business that accepts payments — retailers, gas stations, doctors’ offices and more — must implement new hardware and software if they want to use this more secure technology. But the pace of the migration may have gotten a jolt this month when Visa and Mastercard separately announced moves to get stores up-and-running more quickly with chip technology.
Both card companies have said they’ve streamlined what’s known as the certification process, which is effectively a thumbs-up for merchants that their systems are ready to safely accept chip cards. Visa said its move is, in part, a way to quell frustrations it has heard from retailers and other businesses as they make the switch.
“Something we’ve been hearing in the marketplace is that some merchants are being delayed because they’re stuck in a certification backlog,” said Mark Nelsen, Visa’s senior vice president of risk products and business intelligence.
Indeed, the National Retail Federation and Forrester Research recently surveyed 56 large and medium-size businesses and found that more than half have installed chip card-related equipment but are still waiting for certification. Of that group, 60 percent say they have been waiting for more than six months. So what does it mean for you, the consumer, if the industry can alleviate this bottleneck? In theory, it should allow retailers to activate chip readers — also known as EMV technology — more quickly. And the sooner the technology is implemented widely, the sooner you can stop playing a guessing game every time you’re at a checkout counter about whether you’re supposed to swipe or insert your card.
Also this month, Visa and American Express each said they were taking a step that won’t be particularly visible to shoppers but that appears to be something of an olive branch to retailers. Each of those card companies said it will not ask merchants to cover the cost of counterfeit fraud on purchases that are under $25.
Here’s the backstory: Back in October, as part of the migration to chip technology, a liability shift took place in which whoever had the more outdated technology — the retailer or the card issuer — would be considered responsible for the costs when counterfeit fraud took place. This meant that retailers would potentially be on the hook for what are known as chargebacks in cases where they hadn’t been before.
Now, Visa and American Express say they will not hold merchants responsible for those chargebacks on transactions under $25 until April 2018. They say the decision is aimed at giving merchants some breathing room as they scramble to switch to chip technology.
James Wester, a payment industry analyst with research group IDC, said the latest moves by the card companies seem to concede that it’s been a bumpy migration.
“It’s an acknowledgement that there have been issues up and down the line with the EMV transition,” Wester said, adding that he thinks card companies, merchants and payment networks alike generally have not handled the transition well.
A major retail industry trade group is looking at the card company’s initiatives with a heavy dose of skepticism. Mallory Duncan, a senior vice president at the National Retail Federation, said that the certification procedures “are modest steps forward. But they don’t really solve the problem.”
Duncan said that retailers “have to get certification for every type of equipment we use, with every card network we accept,” Duncan said. If not every player in the business has switched to the new approach, he worries his members will still face a cumbersome process. And he said the chargebacks policy is “too little, too late,” coming after retailers have already footed the bill for millions in fraud costs since October.
As these new policies have debuted, retailers, card issuers and payment networks have continued to march toward wider use of chip technology. For example, MasterCard recently announced that nearly 70 percent of all MasterCard branded credit cards in the United States are now chip cards. And according to a survey by NRF and Forrester Research, some 48 percent of large and midsize retailers expect to have activated chip technology in their stores by the end of June, and 86 percent expect to have done so by year’s end.