What's holding back EMV?

Visa has new stats showing that nearly three-quarters of U.S. merchants still can't handle chip cards

Chase EMV United card
Martyn Williams

New stats from Visa paint a sobering picture of the acceptance of EMV, a.k.a. chip cards. June stats from what Visa says are the "top states for chip-ready merchants" show that 66% of merchants are not yet able to handle EMV. Nationally, that "do not accept" number jumps to 72%. This is nine months after October's EMV liability shift, which was supposed to have been when most merchants were supposed to be accepting EMV transactions.

"The challenge for many merchants has been getting their EMV-capable POS terminals certified and turned on by their merchant acquirers," said Alex Johnson, the director of the credit advisory service at the Mercator Advisory Group. "The certification process has proven to be more complex and time consuming than many had expected and thus there is a big backlog of merchants waiting to have their terminals certified."

Visa's presumed point in releasing the stats was to show how the numbers were even worse before. (OK, it would probably prefer to say that the stats are better than they had been.) Either way, the U.S. EMV migration is hardly performing swimmingly.

Let's dig a little deeper in the newly released stats. Visa reported the existence of more than 326 million Visa cards, which means there are a lot of cards that have never been inserted into a chip reader.

In the merchant details, things get interesting. From Visa: "The U.S. added more than 100,000 chip-enabled merchant locations in June, bringing the total to 1.3 million, or about 28 percent of the total merchant population in the U.S. More than three-quarters of those chip-ready locations are small and medium-sized businesses."

Visa then threw in a bit of context, which itself needs more context: "The U.S. is the largest chip market in the world, with more cards than the U.K. and Brazil combined, the second and third largest chip markets respectively." At a glance, that appears to suggest that the U.S. is doing well, but the U.S. is the "largest chip market" solely because it has such a large card-using population. The percentage of merchants accepting in the U.K. and Brazil is much higher. Then again, they have both been using EMV for a lot longer than the U.S.. (That's the trouble with context. More context simply begets yet more context.)

The bottom line in all of this is that the card brands put in place a system for EMV approval that was highly bureaucratic, requiring sign-offs and approvals at each stage. That's fine, if they had put in place — courtesy of a very large budget — sufficient people to go around and do all of that approving. I've talked with lots of merchants that would love to accept EMV cards, but they are awaiting software patches from vendors or secondary approvals from processors or sign-off from someone representing one of the card brands.

There is a lot of history here that explains some of this. Merchants — who, like journalists, see little reason to do anything until the deadline is imminent — delayed starting their EMV process, only then discovering that it would take far longer than anticipated.

One of the reasons for those merchant delays has been mobile payments. At times when they should have been starting the EMV process, mobile wallet efforts were making marketing claims that distracted merchants, many of whom were privately hoping for an alternative to EMV. Hence, a deadly combo of wishful thinking and procrastination doomed the EMV process.

Copyright © 2016 IDG Communications, Inc.

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