Nearly 90% of U.S. point-of-sale terminals will be ready to accept Europay-MasterCard-Visa (EMV) chip cards by 2017, according to a new Aite Group LLC study. The report examines the reterminalization of card-acceptance locations triggered by the payment card networks’ plans announced in 2011 and 2012 to wean America off of fraud-prone magnetic-stripe credit and debit cards.
Aite senior analyst Rick Oglesby predicts that 88% of U.S. card-acceptance locations in 2017, an estimated 10.2 million, will have the hardware needed to accept EMV cards as well as near-field communication (NFC) payments, which the card networks are promoting simultaneously with EMV to jump-start mobile payments.
Aite’s estimates, however, have a lot of moving parts. They include the installation of standardized EMV-capable hardware, software upgrades, processor certifications for EMV, and merchant education and awareness of the chip card standard, as well as merchants’ willingness to play ball. Aite found that 75% of 350 merchants it interviewed in the first and second quarters had never heard of the networks’ EMV migration plans.
Even among those merchants that were aware of EMV, 37% said they did not plan to upgrade their equipment before the networks’ October 2015 liability shifts that will make them, instead of card issuers, responsible for counterfeit-fraud losses from transactions originating with EMV cards used at non-EMV terminals. Fifty-three percent said they planned to meet the deadline and 10% didn’t know.
Aite’s basic assumption, based on a total of 491 interviews with executives of small and mid-sized merchants, is that the average merchant replaces a terminal once every 5.7 years. Some merchants, such as restaurants and bars, take a bit longer, 6.1 years on average, while others take less time. Dry cleaners and laundries, for example, replace terminals every 5.1 years on average.
Those findings mean that merchants replace about 17% of all terminals every year. But some merchants have really old terminals—6% reported their equipment is 10 or more years old, 2% of terminals are 8 to 10 years old, and another 6% of terminals are 6 to 8 years old. Thus, Aite estimates 84% of terminals could be expected to have been replaced in six years. But if sales efforts by acquirers to induce the changeover are factored in, 88% of locations could have EMV/NFC hardware by 2017, according to the report.
Aite also interviewed executives from 22 merchant-acquiring companies and 48 POS technology providers. The equipment acquirers are deploying today at merchant locations is increasingly configured to accept EMV cards. Aite expects 75% of terminal deployments this year will be EMV-capable and nearly 100% next year.
Hardware, however, doesn’t mean a terminal can actually accept an EMV card. It needs software too, and that area lags, Oglesby tells Digital Transactions News. “What’s really happening is the device manufacturers are putting that chip in and getting the devices out,” but they’re not activated for EMV payments, he says. Such activations in many case will require manual software upgrades, a time-consuming process. “It’s going to be more than your normal software upgrades over the next few years,” he says.
One encouraging note is that most merchant acquirers met Visa Inc.’s April deadline of being capable of processing EMV transactions, according to Visa and Aite’s interviews with acquirers.
“Acquirer processors representing the vast majority of U.S. face-to-face sales volume have completed Visa’s mandated requirements, and we are working actively with the remaining acquirer processors to help them complete this process,” a Visa spokesperson says by e-mail.