Most large U.S. merchants easily will comply with Visa Inc.’s first level of incentives to make payment terminals ready to accept contact and contactless EMV cards next year as part of the card brand’s U.S. push toward chip card technology, but it may take smaller merchants a year or two to get there, payment industry experts suggest.
While merchants will continue to support a variety of types of transactions including magnetic-stripe, signature and PIN-debit technology, the bigger challenge for large merchants will be the task of reconfiguring internal systems on the back end to fully process EMV transactions by fall 2015 under what some analysts say is an “aggressive” deadline for merchants.
After Oct. 1, 2015 merchants without internal systems to process EMV transactions could be liable for fraudulent transactions that EMV technology could have prevented, Visa said in its Aug. 9 announcement. Fuel-selling merchants will have until Oct. 1, 2017, before a similar liability shift takes effect for processing EMV transactions at unattended terminals (
With its various incentives, Visa hopes to accelerate the U.S. migration to EMV to support more secure payments worldwide and ready the U.S. marketplace for the arrival of Near Field Communication-based mobile payment technology, the network says.
The nation’s largest merchants already are “mostly poised” to upgrade and replace payment terminals to accept contact and contactless EMV cards at the point of sale, Randy Vanderhoof, executive director of the Princeton Junction, N.J.-based Smart Card Alliance, tells PaymentsSource.
Visa said it will expand its Technology Innovation Program to the U.S., eliminating the requirement for eligible merchants to annually validate their compliance with the Payment Card Industry Data Security Standard for any year in which at least 75% of the merchant’s Visa transactions originate from chip-enabled terminals.
“It won’t be a big deal for large merchants by next year to ensure that most of their terminals can accept (contact and) contactless payment because the majority are already equipped for it or are moving in that direction,” Vanderhoof says. “But smaller merchants more likely will wait to upgrade to contactless until the time they would ordinarily replace terminals, which will be anywhere in the next four years, depending on where they are in their terminal lifecycle.”
While EMV card acceptance may not be a big hurdle for large merchants to clear, the back-end processing of such transactions is a different matter, Vanderhoof suggests.
“The deadline Visa has set for full EMV compliance surrounding the liability shift is quite aggressive, given the size and diversity of the U.S. market,” Vanderhoof says. “As with any large group, it’s almost inevitable that some large merchants will underestimate the potentially huge task of changing all their back-end systems to be EMV-ready,” he says.
Visa in 2004 announced similar EMV-adoption incentives in Canada. But when the liability-shift deadline approached on Oct. 1, 2010, members of the payment industry asked for a postponement because many were not ready. Visa and MasterCard Worldwide subsequently postponed the liability shift until March 31, 2011 (
If Canada is any guide, smaller merchants may have an advantage over larger merchants in adapting their systems to process EMV payments, experts say.
“Once a smaller merchant has its EMV terminals in place, reconfiguring systems for processing transactions is relatively simple, while large merchants typically must do a significant amount of reconfiguring of large software systems in order to change over to processing EMV transactions,” Catherine Johnston, president and CEO of the Advanced Card Technology Association of Canada, which helps oversee Canada’s payment industry technology compliance efforts, tells PaymentsSource.
Although certain merchants may find themselves racing to meet Visa’s 2015 liability-shift date, the majority are likely relieved to finally have a clear path to follow in implementing payment-terminal upgrades, observers say.
“It’s an aggressive deadline, but merchants are generally going to be happy to finally get some guidance on what the future holds as well as some incentives to move forward on contactless and EMV technology at last,” Jose Diaz, director of technical and strategic business development for Weston, Fla.-based data-security firm Thales e-Security Inc., tells PaymentsSource.
“Merchants that implemented contactless-payment technology in the U.S. five years ago were left hanging because overall penetration remained low, and there was no reason to move forward with it. Now there are real incentives, which are going to restart the momentum for U.S. merchants to upgrade to new payment technologies.”
