April 6, 2016
By John Stewart
Of the challenges presented by the U.S. payments systems’ transition to the EMV chip card standard, one of the least reported is confusion among both consumers and merchants caused by the sudden appearance of puzzling terminal messages.
Meanwhile, new numbers indicate petroleum marketers face a daunting challenge meeting their October 2017 liability-shift deadline. And impatience with the typical “dip” routine with chip cards is likely to result in the introduction of so-called dual-interface cards featuring both contact and contactless capability sooner than many thought.
These are among the salient points presented by expert speakers Wednesday at the Smart Card Alliance’s annual Payments Summit in Orlando, Fla.
It’s still early days for the EMV transition, which began in earnest at the point of sale on Oct. 1, the date by which network rules shifted responsibility for counterfeit, and in some cases lost-and-stolen, card fraud from issuers to merchants in instances where merchants are unable to process chip card transactions. One matter issuers and processors need to clear up is how instructions and information are presented at ATMs and point-of-sale terminals, said Jamie Topolski, director of alternative payment strategies at Fiserv Inc.
“There are unanticipated or unwanted experiences consumers and merchants are encountering,” he told the Payments Summit audience. “EMV 101 education is going quite well. The basics are covered. However, there are other scenarios occurring.”
One example is that of POS terminals flashing an enigmatic message instructing the cardholder to “Select Payment” and presenting a choice of “Visa Debit” or “US Debit,” he said. The befuddling prompt temporarily stymies both cardholders and clerks and needlessly adds seconds to transaction times.
Likewise, many consumers who have grown accustomed to signing for debit card transactions are frustrated by PIN prompts. In particular, this presents problems with health-savings account cards, which run on debit rails but for which most cardholders have never set up a PIN. With that roadblock, “the customer at the pharmacy counter can’t get his medicine.” said Topolski.
These issues could prove to be relatively minor, however, compared to the hurdles gasoline marketers face before they can adopt EMV in time to avoid the liability shift, said Terry Mahoney, a partner at Chicago-based W. Capra Consulting Group and a former petroleum-company executive. “The industry has issues,” he said, speaking on a separate panel. “Outdoor card readers are the bumpy road ahead.”
Nearly all gas pumps more than a handful of years old will likely need to be completely replaced to be capable of running EMV transactions, Mahoney said. For a station with eight pumps, that comes to an investment of about $80,000. That, he explained, will cut deeply into the station’s typical earnings. The result: “It’s going to be an extreme struggle for the industry to meet its October 2017 EMV date,” Mahoney said.
W. Capra’s projection is that, among convenience-store operations with gas pumps, 14% of locations will be EMV-capable at the pump by the end of this year, rising to just 23% by October 2017. Even past 2018, only a little more than one-third of locations will have EMV at the pump.
He underscored the importance of this shortfall with a few numbers. Among the 150,000 U.S. retail fueling sites, 125,000 belong to convenience stores. Of all fuel sales, 75% are completed with payment cards, including fleet and private-label cards, accounting for fully 12% of all U.S. card-based dollar volume.
An optimistic note came from Oliver Manahan, a consultant and former MasterCard Inc. executive who spoke on the same panel as Topolski. With many merchants and consumers complaining about how long it takes to complete an EMV transaction, so-called dual-interface cards may soon come to the rescue. Equipped with a contactless antenna as well as a chip, this card can be waved or tapped at a POS device as well as inserted. “Dual-interface cards will happen in the U.S.,” he pronounced. “It’s a question of when, not if.”
Speaking to Digital Transactions News, Manahan estimated dual-interface cards at most account for “a high single-digit” percentage of EMV cards in the U.S. currently.
The reason that will change, perhaps quickly, is that consumers who try contactless cards “will get hooked on them,” Manahan told the audience. Transaction times with these cards are at least two seconds faster than with contact EMV, he added. That will push dual-interface cards to top-of-wallet position, leading more issuers to favor them, despite the added cost of the antenna.
A Canadian, Manahan pointed to the EMV experience in his home country, where EMV was introduced years before it came to the United States. “We have shown in Canada there’s a top-of-wallet advantage and a frequency of transactions that quickly pays for that antenna,” he said. “In the early days of EMV in Canada, consumers sought out issuers of dual-interface cards.”
The result is that 30% of EMV transactions in Canada are now contactless, Manahan added.
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