May 24, 2016
By Allison Ward, Account Director, Walker Sands Communications
As of October 2015, the liability deadline passed for U.S. merchants and card processors to adopt Europay, MasterCard and Visa (EMV) standards. Merchants or credit card processors that did not make the switch in time for the deadline are now liable for any point-of-sale fraud losses associated with antiquated magnetic stripe cards. As with any new technology, there’s always a learning curve and some hurdles along the way for both consumer and business adoption. Six months following the EMV liability shift, Walker Sands wanted to examine how consumers are responding to the change, so we surveyed 575 of them to measure sentiment toward new chip cards.
Our study, “ No Easy Move: The Switch to EMV ,” found retailers and card processors have been slower than expected to roll out new card readers, inform customers and thoroughly train staff, leading to some friction with the customer experience. And this friction not only applies to in-store transactions. In many cases, customers have faced obstacles when it comes to CNP transactions, such as recurring billing and online payments.
Here’s an overview of our key findings: [hide for=”!logged”]
Consumers faced friction right out of the gate
While the EMV liability shift deadline hit in October 2015, many banks, merchants and credit card processors have been gearing up for several years. In fact, following adoption across Europe and the rest of the world, Visa first announced plans to accelerate chip-card adoption in the U.S. as early as 2011.
However, six months following the deadline, consumers report they’ve faced several challenges right out of the gate. While many U.S. credit and debit card holders were sent new chip cards, “The Switch to EMV” found that more than one-quarter of consumers (27.3 percent) did not receive adequate instructions from their banks on how to actually use the cards. This disconnect makes challenges in-store and online almost inevitable.
Following this lack of information, many consumers reported similar complaints when first using their EMV chip cards. More than half of consumers have experienced stalled or delayed transactions, and the same amount of consumers have been instructed to swipe their cards instead of inserting them into the readers, which can ultimately put security back at square one. Other common consumer complaints following the switch include multiple attempts at reading the card, frozen card readers and declined transactions.
Online payments inconvenienced by new cards
Much of the focus surrounding EMV transactions has been on in-store, card-present transactions. But what impact does the EMV shift have on CNP transactions? It turns out the transition hasn’t gone as smoothly as the industry had hoped. Today, many consumers store their credit or debit card information on Websites or apps they frequent, such as Amazon or Uber. Other consumers have their cards set up for recurring payments including Netflix and monthly electric bills. Stored credit and debit card information has to be updated each time a consumer gets a new card, whether that’s because the card was lost or stolen, it expired or it was reissued after a security breach. The EMV shift is no exception.
According to the study, nearly two in five consumers (39 percent) have had to update online accounts or recurring billing after receiving EMV cards, which takes time and can be a hassle. Nearly one in 10 consumers (9.4 percent) faced missed or failed online payments as the result of the EMV shift. Not only is this an inconvenience to consumers, but it can ultimately have a negative impact on banks and merchants. Additionally, for every failed payment, online merchants risk lost sales and missed revenue opportunities.
Chip cards seeing slow and (un)steady adoption
Nearly every U.S. credit and debit card holder received new chip cards in the mail leading up to the October 2015 liability shift—but that doesn’t mean they’re being used. “The Shift to EMV” findings show EMV chip cards are seeing slow adoption across the board. This could possibly be good news for CNP merchants. Card-not-present fraud was expected to surge as criminals migrate from more difficult counterfeit fraud to easier channels (i.e., e- and m-commerce). This surge may have been delayed, giving merchants more time to prepare.
There are many potential reasons for slow adoption including, merchants not implementing the right technology to accept chip cards, chip card readers not working and consumers uncertain of how to use the cards.
The findings show that approximately half of consumers use EMV chip card readers less than half the time, while another 10 percent never use them. Slow adoption by merchants, broken card readers and other struggles ultimately make consumers think EMV is not a priority, so they opt to continue swiping cards. Instead of positioning EMV as a low priority, merchants, banks and card processors need to do a better job of aligning on EMV readiness and adoption—and do the same for other consumer-facing technology in the future.
U.S. EMV adoption has faced its fair share of hurdles since the liability deadline passed last October. However, that doesn’t mean it’s too late for merchants, banks and card processors to turn the customer experience around. EMV offers the opportunity to provide consumers with a more secure experience with implications for online purchasing as well, while saving merchants and banks from potential fraud losses. By implementing the right technology, providing detailed instructions to consumers and properly training staff, the payments industry can improve the customer experience and leave the struggles of early EMV adoption behind them.
Walker Sands Communications is the official PR sponsor of the 2016 CNP Expo. Visit them at booth 301 in the exhibit hall of the Loews Royal Pacific Resort in Orlando, Fla. [/hide]