Banks and credit companies have been sending consumers new cards, which look like their old cards but are fitted with a small metallic high-tech chip known as EMV, which stands for Europay, MasterCard, Visa - the three companies that created the standard.
The chip’s goal is to keep thieves from easily accessing consumers’ personal information. The high-tech chip creates a unique code for each transaction, making it difficult for criminals to duplicate consumers’ information. The new cards have to be inserted and then held in a card reader, which then uploads the information to complete the transaction.
These chip cards are the norm across the globe, where spenders dip their card rather than swipe it, because they make counterfeit fraud, which recently accounted for more than a third of all credit card fraud in the U.S., nearly impossible. But the new credit cards represent only half of the equation: merchants have to buy and install new terminals that accept these EMV-enabled cards. Visa, Discover and MasterCard decided together that, after last October 1, 2015 (American Express used October 16), whichever entity processing a transaction that had the lesser technology - that is, either the retailer or the bank - would be responsible in the event of a hack. Previously, only the issuer was responsible.
Some stores were quick to adopt the new machines, but not everyone is up to speed. Concerns over cost, implementation delays, and not wanting to interrupt holiday shopping have caused merchants to lag behind.
Your Cards Have Probably Been Updated
Back on October 1, when the new policy rolled out, nearly half of MasterCard plastic was chip-enabled. As of March 20, 2016, almost 70% of MasterCard credit cards have chips on them. By the end of 2017, it will be almost 100%. If cards from Visa, Discover, and other companies are tracking at the same rate, U.S. chip adoption would actually be on par with Europe by the end of next year, and ahead of adoption rates in Canada and Latin America.
Retailers Still Trail Behind
MasterCard and other industry insiders had expected about 50% of merchants to have an activated terminal by the end of last year. Right now, that’s closer to 30% to 40%. Part of the problem was that retailers didn’t want to change the way they accepted payments in the middle of the lucrative holiday shopping season. Since the beginning of the year, though, MasterCard has seen more businesses start shifting to the new terminals.
Better Adoption Will Be Good for You
You’re not financially liable for bogus credit card charges, but any fraudulent usage is a hassle and for this new credit card payment system to stop counterfeit fraud, both issuers and merchants have to get on board. The point of putting EMV in the market, and the point of migration to new terminals, is to reduce counterfeit fraud, so you need a certain penetration of terminals and cards in the market before you start to see that benefit take hold.
Based on evidence from EMV adoption in other markets, the “tipping point” of fraud reduction is estimated to happen when 60% of cards have EMV chips and 60% of store terminals are chip-enabled. Right now, the balance is closer to 60%/30%, but things are changing quickly.
This means that you should be prepared to dip your card more often in the future, and you should be happy you’re doing so.
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