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No EMV? No Problem: Retail Treasurers Admit They’re Lax

  • By Andrew Deichler
  • Published: 9/21/2015
CardsRESTON, VA. -- Despite the EMV liability shift fast approaching, several treasurers of American retailers admit that they will not be ready for the October 1 deadline. In fact, some said they won’t migrate to EMV by the end of 2015—and some currently have no plans to migrate at all.

Some of these retail treasurers are members of AFP’s Treasury Advisory Group (TAG), which held its latest meeting last week. When the EMV liability shifts on October 1, merchants will be liable for data breaches, not their card issuers.

Tom Hunt, CTP, AFP’s director of treasury, acknowledged that many retail treasury professionals expressed apprehension about adopting EMV. He noted that only about 25 percent to 30 percent of them indicated that they would be EMV-ready by the upcoming deadline.

Claudia Swendseid, senior vice president of the Federal Reserve Bank of Minneapolis, noted that those estimates are close to recent projections from the Merchant Advisory Group. “They’re thinking about 20 percent of merchant POS terminals will be EMV-capable,” she said.

Swendseid added that the reason AFP’s numbers are a little higher is because the treasurers attending the recent roundtable were primarily from large retailers. “The fact that it was 25 percent to 30 percent was probably reflective of your audience," she said. "I think in aggregate it’s probably going to be a bit lower than that.”

Currently, merchants are only liable if the customer is using a chip card, but they shouldn’t bank on consumers using mag-stripe cards for much longer. According to estimates from the EMV Migration Forum, by the end of 2015, about 50 percent of the debit and credit cards in circulation in the U.S. will be chip cards. A retail treasurer in the TAG meeting said that she’s heard it could be as high as 70 percent.

Wells Fargo and Gallup released the findings of a July 2015 study about small business adoption of EMV, Swendseid added. They lag unsurprisingly in EMV readiness. “Only half of the respondents knew about the October 1 liability shift to merchants,” she said. “Of the ones that did know, many think it’s too expensive to upgrade to EMV or they aren’t concerned about fraud losses. And this could be; depending on the nature of your business, if most of your customers are people you know—say you run a hair salon—you’re probably not subject to much counterfeit fraud. So I think the small business community is in a different situation than your big box retailers.”

Magnus Carlsson, AFP’s manager of treasury and payments, added that retailers who are not EMV compliant can implement other procedures at the point-of-sale to protect themselves. “If you’re choosing to not make the investment, you’ll take the hit, but you can also introduce internal procedures to make the authentication at the point of sale stronger,” he said. “You could actually check the signature instead of just letting it go. You might even begin checking IDs.”

However, these types of controls take time and may be problematic for retailers who want to move customers through the checkout process quickly. Swendseid noted that one large fast food chain has no immediate plans to adopt EMV, but is also highly unlikely to adopt additional controls. “They’ve made a decision not to be early adopters of EMV, based on an assessment of their counterfeit fraud risk compared to the cost of EMV implementation,” she said. “But they’re not likely to put in additional controls at the point of sale because customers expect to move through the payment process quickly. So it really is a benefit cost assessment that different businesses need to look at.”
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