EMV Adoption Slows, But the Contactless-Terminal Foundation is Growing

By Kevin Woodward
@DTPaymentNews

Almost a year after the U.S. payment card industry adopted EMV chip cards for point-of-sale transactions, approximately 44% of U.S. merchants that accept credit and debit cards have EMV POS terminals.

That assessment, in The Strawhecker Group’s latest EMV survey released Tuesday, is less than an earlier estimate that put EMV adoption at 50% of U.S. merchants. Now, Strawhecker, an Omaha, Neb.-based payments consultancy, predicts that the adoption figure will hit 51% by December.

Still, more than a third of the EMV-equipped merchants have terminals capable of contactless payments, and more than a quarter have activated the tap-and-pay feature, according to the data. Contactless readiness is widely seen as a prerequisite for mobile-payments acceptance.

The percentage of U.S. merchant locations actively accepting chip card payment is 29%, Strawhecker says. In comparison, 11.1% of Visa Inc.’s transactions are chip-on-chip as of July, while CardFlight Inc., a mobile POS and gateway provider, pegs its chip-on-chip figure at 46%.

“Overall, EMV from a hardware perspective, it’s slowing down a bit,” Jared Drieling, Strawhecker business intelligence manager, tells Digital Transactions News. “There’s a big disconnect between merchants that have terminals and those who have it ready to go.” Strawhecker surveyed 79 payments companies that collectively serve 3.4 million card-accepting merchants.

There are three reasons for the “disconnect,” Drieling says, all related to preparedness at various providers. Processor readiness and replacement-POS-terminal readiness, each cited by 47%, are the top factors, followed by gateway readiness, 45%.

“Activation and certification is one significant issue,” he says, referring to the delays many experience waiting for a payments entity to certify the POS terminal’s EMV application as compliant. “There’s a large base of merchants out there essentially waiting in a queue.” Availability of EMV POS terminals can also be an issue in some cases.

Merchants face some urgency in using activated POS terminals because many have had increasing chargebacks from non-EMV compliance. Indeed, 60% experienced increased chargebacks, Drieling says. “Now that merchants are feeling the pain and understand the implications of EMV, they’re all rushing to get those [EMV] plans in place.” Visa and MasterCard Inc. have recently introduced programs to ease the chargeback burden for merchants not yet prepared for EMV.

Some merchant types, however, may hold out on EMV much longer than others, he says. Quick-serve and fast-food restaurants, for example, see little value in adopting EMV, especially if it slows the pace of the checkout line, Drieling says. “The additional time it takes to conduct an EMV transaction is very impactful,” he says. Another aspect is that these merchants tend to see little fraudulent card activity. “Those two factors for QSRs have them as EMV laggards,” he says.

Card brand efforts to improve consumer and merchant perception of the time it takes to complete an EMV transaction—like Visa’s Quick Chip and MasterCard’s M/Chip Fast—could help, Drieling says. Merchants are testing these protocols, which enable consumers to remove their chip cards from POS terminals in the middle of a transaction instead of waiting to the end, he says. “They are clearly piloting EMV and trying to understand it better,” Drieling says.

Merchants also appear to be adopting contactless payment capability. In the survey, 36% say they have a contactless terminal and 28% have activated the tap-and-go payment functionality. MasterCard pegs the number of EMV-accepting merchants at 2 million, putting the estimated number EMV-accepting merchants that also accept contactless payments at 560,000.

This signals the contactless payment infrastructure, necessary for the growth of mobile-wallet adoption and usage, is building, Drieling says. “Mobile payments adoption has been low because the infrastructure wasn’t in place,” he says. “Now, we’re seeing that infrastructure build out.”