It's no secret that the EMV transition was met with confusion and consumer complaints. But more than a year after the liability shift went into effect, the benefits of the new technology are starting to show. According to data from MasterCard, fraud is decreasing in the wake of EMV's implementation.
When compared to January 2015, the counterfeit card fraud rate for January 2016 at large chip-enabled merchants fell 39 percent. Additionally, the dollar value of the fraud that did occur dropped 27 percent.
While these numbers certainly appear hopeful, it's important to keep them in perspective. Though it didn't take long for most consumers to receive at least one chip-enabled card, the adoption rate on the merchant side has been significantly slower. MarketWatch reported just 7 percent of card-present transactions used EMV last year.
"Is this a true reduction, or is it that issuers have (as we have heard in the press) simply launched their fraud into the merchant's backyard with liability shift?" Gray Taylor, executive director of Conexxus, pondered in MasterCard's press release. "The fact is, most merchants under the October 2015 date are still struggling to get a usable EMV platform in their stores."
Learning from EMV leaders
When implementing a new standard for the first time, it's important to look to pioneers to see what sorts of challenges may lie ahead. In the case of EMV, nations that made the shift before the U.S. includes the U.K., Australia and Canada, among others. These countries, too, experienced challenges during their own liability shifts.
The U.K. was at the global forefront, having implemented its liability shift in 2005, according to a report from the Aite Group. That year, counterfeit card fraud totaled a value of 97 million Great Britain pounds, equal to about $119 million today. The year prior, fraud totaled 130 pounds, about $160 million today.
At first glance, these numbers indicate immediate success. But in reality, the U.K. had a fair number of challenges before fraud declined again:
- 2006: 99 million pounds ($122 million).
- 2007: 144 million pounds ($177 million).
- 2008: 170 million pounds ($209 million).
- 2009: 81 million pounds ($100 million).
- 2010: 48 million pounds ($59 million).
Still more work to do
For EMV to be effective, it's crucial that all people involved in payments - from banks to businesses to consumers - adopt the technology. Card upgrades have already occurred at a promising rate, but there are still approximately 30 percent of consumers who have yet to receive a chip-enabled replacement, MarketWatch reported. To move this aspect along, it's up to credit unions and other card issuers to give their members the power to make more secure purchases.
But the biggest movement that needs to occur is the merchant transition. PaymentsSource reported more than 40 percent of merchants have successfully implemented EMV in their locations, and more than 20 percent have started the conversion process. Further, according to a survey from The Strawhecker Group, 72 percent of the nearly 4 million merchants interviewed reported they planned to be converted to EMV by December 2016, and 90 percent said they planned to have everything squared away in 2017 or later.
But there are still many retailers who say they aren't sure or simply won't convert to EMV. While this number has gone down significantly in the past two years - more than 30 percent of merchants indicated this was their position in 2014, compared to less than 10 percent in 2016, according to PaymentsSource - it's clear that there's still work to do.
Credit unions can help the transition in multiple ways. First, by ensuring that all card-carrying members have chip-enabled cards. Second, by educating your community about the importance of EMV. Finally, offering assistance to your business members and other companies in your community for their transition to EMV.