In an effort to prevent fraud and make credit and debit cards safer for consumers, the industry push to embrace EMV technology may turn out to be its undoing. As EMV rolls out across the U.S. the change in liability structure for fraudulent purchases – combined with the high cost of implementation – has retailers seeking alternative payment methods that may usurp the ubiquity of cards.
"The EMV rollout earned the ire of many – including powerful retailers like Walmart."
One of the biggest impediments to goodwill for the new EMV cards, according to Philip Heasley, president and chief executive officer of ACI, has been the abrupt and steamrolling initiation of the program in the U.S. While the technology had already been in extensive use overseas, American regulators were slow to adopt.
Finally, when the switch was made, Heasley told PYMNTS that merchants were only given "[two years] to adapt, instead of the three years they gave everybody else around the world." For smaller retailers with limited resources, this turnaround time felt too abrupt. Combined with inconsistent regulatory guidance and the threat of merchant liability for fraudulent purchases – rather than the onus falling on the creditors – and the EMV rollout earned the ire of many. This includes powerful retailers like Walmart, who has initiated litigation against Visa, one of the main backers of the technology.
Lack of control
This issue, according to Liz Garner of the Merchant Advisory Group, isn't so much the unwillingness to embrace the new technology. Rather, Garner cautions that retailers like Walmart feel put upon and their ability to control the way they conduct business is hampered – to the point where the essential function of the technology is being undermined.
"Walmart wants to have the choice to implement the best business practice that makes sense for their business and their customers," Garner told Bank Info Security. "This is really a move by Walmart to show that the PIN adds value to the customer and adds security to the transaction. Other merchants have been trying to get their customers to essentially enter their PINs at the point of sale as well."
"The debate over implementation of new card technology may be futile."
Rise of contactless payment
Indeed, the debate over implementation of new card technology may be futile. With many retailers expanding into the ecommerce space, alternative payment methods that are fundamentally more secure and skip cards completely are taking off. A recent study from the the U.K. Cards Association estimates that in the United Kingdom – already a leader in cashless payments – one in seven transactions are made with entirely contactless payment methods like NFC-enabled debit cards and smartphone services like Apple Pay.
"It took almost eight years for monthly contactless spending to reach half a billion pounds – now it's grown by the same amount in just four months," Richard Koch, head of policy at the U.K. Cards Association, told The Financial Times. "This dramatic rise shows that paying with contactless is now second nature for millions of consumers who see it as an alternative to cash."
Working between the cards
In the U.S., many major retailers have already embraced this push to integrate contactless payments. Home Depot has been a long-time partner with PayPal, offering their customers the ability to use the popular online banking app to pay for their purchase. Apple Pay's nationwide adoption has continued to climb, with Google's Android Pay recently adding support for nearly 50 new banks, including Citizens and Capital One.
"The opportunity is the banks could figure out how to [work] between the credit card and the debit card guys," said Heasley, mirroring the expansion of alternative payment methods, driven by tech providers and merchants rather than regulatory imperative. Whether this will lead to the die-out of physical cards – and in what timeline – remains to be seen.