In the Race Against the EMV Deadline, Merchant Acceptance And Debit Lag

In the relentless push toward compliance with the Europay-MasterCard-Visa (EMV) smart card standard, two critical factors are lagging behind: merchant acceptance and EMV debit. That’s according to executives who spoke Tuesday at a conference in Salt Lake City, Utah, on EMV and mobile payments.

U.S. issuers and merchants face an Oct. 1, 2015, deadline to comply with EMV or assume liability for fraudulent transactions. In general, the executives who spoke at the Smart Card Alliance’s Payments Summit expressed satisfaction with the pace of compliance so far. “We’ve made a ton of good progress,” said Kimberly Lawrence, senior vice president of global corporate initiatives at Visa Inc.

But the technical complexity of harnessing tens of thousands of acquirers, independent sales organizations, independent software vendors, value-added resellers, and retail organizations has made for disappointing progress with the merchant base, speakers said. “I expected we would see a bit more merchant adoption by now,” said Patty Walters, senior vice president for EMV corporate strategy at Vantiv, a Cincinnati-based merchant processor.

With eight months to go until the liability-shift deadline, Lawrence released figures indicating some 78,800 merchants are currently wired and ready to accept EMV credit and debit cards, a small fraction of the overall U.S. merchant base. “The eight months ahead promise to very bumpy,” she observed.

Walters, who spoke later, agreed. “I do not think we are going to hit critical mass in 2015 in merchants,” she said. “We will have a very rough year ahead.”

Indeed, such predictions about not just the months remaining until the liability shift, but also about the months following the shift, were common among speakers. “There’s a lot of confusion, still, among merchants,” said Allen Friedman, director of payment solutions at terminal maker Ingenico Group, who spoke on a panel following Walters’s speech. “It’s going to be a busy year to year-and-a-half and then a very long effort to get the rest of the market fulfilled.”

To reach as much volume as possible that could be vulnerable to the counterfeit and lost-and-stolen fraud that EMV combats, Walters said Vantiv is concentrating on segments such as retail, grocery, and pharmacy. “We are heads down focused that the merchants that need us most get us,” she said.

But lagging merchants aren’t the only challenge in the massive effort to meet the EMV liability-shift date, which was set by the national card networks. Debit compliance is also behind. In part, this is because the industry only recently settled on a common standard that will allow EMV debit transactions to be routed according to merchant choice, as mandated by the Durbin Amendment.

The timing of this agreement, which was reached among the chief debit networks only last year, means technical work on implementing the standard was long delayed. “It’s far, far from the case that the common-debit work was done [with the agreement],” said Lawrence, who forecast that 41% of debit cards will be EMV-compliant by the end of the year, compared with 70% of credit cards.

“Starting on this [common standard] a year earlier would have been nice,” said Friedman.

He added a further complication lies in the lack of a standard for contactless EMV debit, a void that companies like Ingenico must fill with their own solutions. “There are some complexities for [common-standard] contactless debit,” he noted, that will likely lead to a “phased” approach, with contactless debit trailing contactless credit and contact credit and debit.

The Payments Summit, the eighth annual event organized by the Princeton Junction, N.J.-based Smart Card Alliance, runs through Thursday.