1st of Oct – EMV Towel Day

The US is, supposedly, moving to chip cards today (EMV technology), away from all the unsecured magnetic-stripe cards…well, sort of. The facts are that US Issuers have barely replaced all the magnetic stripe cards in circulation, the payment processors are not ready, the merchants don’t have EMV readers (and don’t seem overly concerned) and cardholders are mostly clueless! Yet, today is the day when merchants assume liability for all the (massive) card fraud in over-the-counter card payments…unless they have upgraded their card reader to an EMV reader (which the processors cannot provide them with) in order to accept those chip cards (which the cardholders don’t have). In some European countries, they’d be burning cars at this point (did someone say France?). But yet, US merchants seem pretty relaxed.

The US is often a beacon of technology advancement.  There are very few areas where the US has been a laggard when it comes to any technology advancement — but the payments sector in the US is shockingly behind. While the US has about a quarter of the world’s card transactions, they also endure half of the world’s card fraud (just for clarity, that is not something to be proud of). Consumers should be outraged. Merchants should be outraged. But they are not.

I love that when I am in a US city, merchants everywhere are using tablets or phones for POS… and then I see the unsecured dongle they are using to take my payment. Let’s get the world back to a place where you don’t just assume your credit card info is going to be stolen.. please? But the thing is, US cardholders don’t really care that much. Yes, it is annoying to have to read carefully through the statements for “extra” items, and yes it annoying to have cards re-issued.  But the issuers mostly pick up the bill for any fraud, and the cardholders don’t lose any money (if they notice the fraud, that is). The merchants don’t seem to be bothered, either, because charge-backs are not a major problem to them. Let me tell you something, Mr. US Merchant – have a look at what your European colleagues are paying for accepting card payments! If you eliminate fraud (with secure EMV technology), there is money to be shared in the form of lower fees, which then again should theoretically benefit consumers in the form of lower prices. However, we have yet to hear about any plans in the US to lower merchant fees with EMV.

But no need to be overly negative.  It is a good thing that the US is finally making a move to secure card payments, which will most certainly reduce the circulation of fraudulent cards. Countries which have adopted EMV technology, which are most countries in the world, have seen a significant reduction in cardholder-present transaction fraud (note that EMV does nothing for cardholder-not-present transactions or eCommerce). European issuers look forward to the US EMV migration because the only real cardholder-present fraud they experience is US-related, because they still print a magnetic stripe on their EMV cards. But once the US moves to chip cards, they will most certainly stop doing that.

Where I grew up, card fraud is unheard of. It is more likely that one would die while taking a selfie (which would be twice as likely than being killed by a shark) than it is to suffer from card related fraud in Iceland. That is certainly not because cards aren’t a popular payment method but, rather, Iceland doesn’t do cash. Instead, consumers often use plastic to buy ice cream, coffee, or even pay a $5 cab fare. Once the infrastructure is in place, the convenience and pleasant experience eliminates the urge to ever reach for cash. And that is the Achilles heal. The US is lacking in its card payments infrastructure in general, both from a security point of view as well as processing. We know real-time payments is not a technical problem as it’s been solved in many places. Without a tech-overhaul, I think the US might continue to lag behind in payments…and checks and cash will remain relevant for a long time. But today is definitely a step in the right direction, although a baby-step by the looks of it.

Perhaps we should call it an EMV Towel Day (with thanks to Douglas Adams).