EMV Adoption in U.S. Faces Significant Hurdles

It could take until 2018 for EMV-enabled cards to become ubiquitous in the U.S., according to a new report from Javelin Strategy & Research.

The report, titled "EMV in USA: Assessment of Merchant and Card Issuer Readiness," states that even though there are only 18 months to go until the EMV liability shift for merchants and issuers, a great deal of work still remains if the U.S. card payment industry is to smoothly transition from magnetic stripe cards to chip cards.

The report's author, Javelin Senior Analyst Nick Holland, says this is due to a number of factors, including lack of coordination in what standard will be used -- such as chip and PIN versus chip and signature -- and not enough consumer and merchant education on why the change is happening.

Further, Holland says the cost of implementing new point of sale terminals and issuing new cards will likely be prohibitive. The report estimates that physical EMV hardware (cards and POS terminals) will cost issuers and merchants more than $6.8 billion in the U.S.

Holland believes that big box merchants will be the quickest to implement EMV terminals, in no small part because they want to avoid the negative press garnered by other retailers involved in recent data breaches. "Big box merchants are more rapidly adopting EMV than may have been expected if it wasn't for what happened to Target," he says.

But Holland says the "long tail" of EMV migration will be small and micro-businesses. Retail establishments with fewer than 20 employees represent 58 percent of U.S. retail establishments, and the report estimates that this specific segment will not exceed 25 percent readiness for EMV by the 2015 benchmark. This projection is based on a survey of small and micro merchants conducted by Javelin in October and November of 2013. Of such businesses, 53 percent stated that they had limited or no knowledge of EMV, and 50 percent stated that they had limited or no knowledge of the upcoming EMV liability shift. "There is still a significant number of small business that have no idea about this," he says.

And the awareness among consumers is even lower; Holland says this could pose a big problem as well.

"What's been most glaringly omitted so far is consumer education, EMV is a big change in payment habits," he says. "If consumers aren’t trained to use cards, you will have significant lag times in checkouts."

While EMV cannot do anything about card-not-present fraud, Holland does say the switch will largely eliminate card counterfeiting. He suggests the U.S. card payment industry set a timeline for retiring the magnetic stripe from payment cards to close the card counterfeiting loophole permanently.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio