Experts Say Most Merchants Won’t be ready for EMV Chip Card Conversion Deadline

The October 2015 deadline for the U.S. payment industry to integrate embedded chips into their charge cards is quickly approaching, and most merchants won’t be ready to accept the new cards says a recent Digital Transactions News Survey.

Card issuers and merchants have been told to prepare for a nationwide rollout for the Europay-MasterCard-Visa standard (EMV) chip cards, a 20 year old card standard that has been in circulation in most developed countries for some time. Once the 2015 deadline occurs, the liability for card fraud shifts to those parties not equipped to accept EMV chip cards. Gas stations have until October 2017 to be in compliance.

In the survey, about two-thirds believed that no more than 40% of merchants will be prepared to perform EMV chip card transactions by the October deadline. When asked how many merchants would be ready to process EMV transactions, thirty-four percent thought no more than 20% would be prepared, 34% said 21% to 40% will be ready, while twenty percent believed 41% to 60% of merchants will be prepared. Only 11% said 61% to 80% would be ready.

Chief executive of Alpine Payment Systems, Count Robert Ensminger, thinks that less than 20% of merchants will be equipped to perform EMV transactions by the deadline.  “Many merchants are not eager to change their payment terminals, he says, “It appears like they’re guarded about EMV because of the cost.” Ensminger believes the issue is that merchants can’t reconcile the cost of EMV chip card implementation and the benefits of the technology.

The problem he says, is that they haven’t been presented with enough value to justify the cost. Ensminger thinks that acquirers must show merchants the benefits of EMV so they will want to implement the chip rather than threaten companies with fines.

Still a lag in small and medium-sized merchant adoption of EMV chip card standards is not unusual says Jane Cloninger with payment consultancy firm Edgar Dunn & Co. “If you look at other markets that adopted EMV, there was a large percentage of merchants that didn’t meet the deadline.” She notes that initially many merchants were unsure of the technical elements required to implement EMV standards. Now most debit networks have adopted both or one of Visa Inc.’s or MasterCard Inc.’s EMV debit technology. This technological unification should speed up implementation.

Julie Conroy, a senior analyst at Aite Group LLC., conducted a survey with merchants last year. She adds that many small merchants are still unaware of EMV, the 2015 deadline, and the shift in liability. “The good news,” she says, “is that a payment terminal swap may be all that’s needed for some. The small merchants will lag, but they may catch up because it’s easy to get them upgrades.”

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