EMV Cards Aren't Winning Over Young Consumers

Older consumers like chip cards better than young people, mostly based on a generational divide over security and speed rather than a predisposition to adopt new technology.

Research from consulting company Morpace found 43% of cardholders aged 18 to 34 prefer swipe cards over chip cards, as opposed to 21% who prefer chip cards. The same research of 1,000 consumers in April found 48% of cardholders aged 55 and older preferred chip cards, as opposed to 30% who preferred magstripe-only cards.

"This seemed counterintuitive to us based on the usual paradigm of younger people more readily adopting new technology compared to older people," said Tim Taylor, vice president of Financial Services for the Detroit-headquartered Morpace.

Further analysis of the data showed young people have the perception that swiped payments are faster than chip payments, Taylor said. "On the other hand, preference for chip cards among older people was more often driven by perceptions of increased security," he said.

Knowledge is king in this generation gap, since chip card transactions generally do not take longer on average than magnetic stripe transactions. In the case of chip cards, consumers keep their cards in the terminal longer than a swipe, so there is a perception of slowness even if the overall transaction time is unchanged.

"Younger people prefer the quicker and faster transaction" said Jeanne Paluch, research director of Morpace. "If you're keeping the card in it feels like it's taking longer."

The higher rejections of the EMV cards, a natural part of the adjustment required for consumers and merchants as the cards and terminals change, make the perception problem worse. If consumers do not use the cards correctly, the transaction process must be repeated. While that's true of all payment types, the repeats add time and create the notion that chip cards do not work properly in general.

"A lot of card holders aren't sure of when to put the card in and when to swipe—and if you do that wrong, you have to repeat the process, which makes the transaction seem longer," said Jessica Tomlinson, a research analyst for Morpace.

To address this perception, Visa and MasterCard have both introduced "faster" versions of chip cards. Basically, these newer versions allow consumers to remove the card from the terminal earlier in the process. Visa and MasterCard's EMV alternatives are not intended to be universal, but are designed for stores with long lines that have been suffering from EMV transaction declines.

The act of removing the card earlier gives the consumer the impression the transaction is "complete" (even though digital processing continues behind the scenes) in about three seconds, mirroring the speed of swipe transactions.

"With the traditional card, you swiped it, put it away and moved onto something else," said Steven Welling, project director for Morpace.

The card networks have painted a bullish picture of the EMV migration in the U.S., pointing out it's largest migration to date. At the same time, the pace of the migration has been slower than predicted and there are lingering concerns about how EMV will be accepted by consumers and small merchants that are reluctant to switch.

Part of the problem is people still don't know enough about the migration, according to Morpace. The company found that among people who prefer to use a chip card reader, only 66% understand why traditional swipe cards are being replaced.

"There needs to be more education…they don't understand why they're getting a different card and they don't know what to do with it," Paluch said.