CEO Outlook: The EMV Migration So Far

JASON OXMAN

Today we mark 168 days since the start of the nation’s migration to chip cards. Okay, maybe day 168 isn’t a particularly milestone-worthy occasion, but it’s Friday, so why not?

Here at ETA, we’ve been getting a lot of questions this week about how the EMV chip card migration is proceeding. So how are we doing in adopting this new technology, the most significant overhaul of the nation’s payments infrastructure in 40 years?

I think it’s important to remember that technology change takes time. Think back to other significant technology overhauls we’ve experienced. The transition from analog to digital television in the U.S. started in 2009, and the last television stations didn’t switch to digital until 2015 – six years later. It took the mobile phone industry thirteen years to reach 25% adoption. Even the upgrade from cell phones to smartphones took 5 years to reach 25% of the population. The PC took 16 years to get to 25% penetration. And the commercial use restriction on the Internet was lifted 21 years ago in 1995, but online commerce is still only about 10% of overall retail. New technology takes time.

And the EMV migration? Well, we reached 25% adoption of chip cards in 90 days. Nearly 600 million chip cards are in U.S. consumers’ wallets already. Almost one million merchants have already upgraded to chip readers. And this is without any mandate – legal or business – to upgrade. No bank is required to issue chip cards, and no merchant is required to upgrade to chip readers. So why is it all happening? Because consumers understand the importance of security, and they have more than 10,000 card issuers to choose from, and more than 8 million card-accepting merchants to shop at. Given such intense competition, banks and merchants are prioritizing security to demonstrate to their customers that they understand the importance of secure infrastructure.

Payments is an ecosystem – ETA members run payments networks and systems, manufacture payments equipment, install and sell software solutions, and much more on behalf of their merchant customers. We all work together to provide the safest and most secure payments infrastructure in the world. Many merchants are realizing that a delay in upgrading now means they have responsibility for counterfeit card fraud, and their frustration is compounded when they realize they are not first in line for upgrades if they start the process today.

And so some merchant trade associations are complaining publicly and loudly that the chip card migration is either a bad idea, or being badly executed, or both. This week, we heard a lot about the testing and certification process preventing merchants from a timely upgrade. For example, I was at a New Jersey Assembly hearing, and I heard a colleague from a retail trade association testify: “What we’re hearing from our members who have installed the equipment is that they have been waiting in some cases months for someone from the card company to come out and certify that they can turn on the machines.”

First of all, every card network certification process is automated – it takes place online – so no one needs to show up at the retailer’s location. But even that aside, the broader issue is that the testing and certification process is required at this point in the process for merchants that make software customizations to the payments systems. Millions of merchants use pre-certified payments systems that are ready to go right out of the box. But if a merchant wants to modify the equipment or software, testing ensures that merchant-initiated modifications don’t crash the payments system, prevent consumers from using their cards to pay, or open the system up to fraud.

Does the certification process work? With one million merchants already accepting chip cards every day, only 168 days after the EMV migration began, I think it’s pretty clear that it does. Merchants that are starting the upgrade process now and making customized changes to software will have to work with their software vendors to ensure the systems are tested and certified. But above all, new technology takes time, and calling a technology transition a failure after 168 days is absurd, especially given the enormous progress we have all made together. We will continue to work together to make the chip card migration a success — the payments industry, our merchant customers, and the entire ecosystem that provides America with the most robust and secure commerce in the world.