EMV Migration in US Expensive and Slow

Although the October EMV fraud liability shift has already passed, only 6% of US merchants were set to meet the deadline, according to CLSA America’s Research. Many merchants feel that their bank/processor has not communicated with them regarding this issue, and are feeling overwhelmed, according to a recent article by Paymenteye.com

The main driver behind the EMV migration is to reduce card-related fraud. Almost 50% of the world’s credit card fraud happens here in the US, costing an estimated $8.6 billion per year. EMV stands for Europay, MasterCard and Visa, the companies that created the standard. It was first introduced in Europe in 1993, and while most of the world has been using chip cards for years, the US is the last major market still using magstripe-only cards. Watch "What is EMV?" video.

Unlike magnetic stripe cards with static data, EMV cards have a smart chip which dynamically creates unique transaction codes that cannot be used again, thereby reducing fraud. Magstripe cards are “swiped” at the register, while EMV cards are inserted (“dipped”) into a terminal slot and remain there until the transaction is processed. Chip-enabled cards are more expensive to produce and take longer to process at the point-of-sale. On the other hand, they have a longer shelf life and can be flash updated, lowering their costs over time.

EMV cards come in two versions: chip-and-signature and chip-and-PIN. EMV compliant POS terminals cost $500-2,000 not including installation, software and other implementation expenses. Rollout of EMV represents a massive expense, considering over 1 billion credit/debit cards, over 10 million POS devices and 360,000 ATMs all have to be replaced or upgraded.