We are all pretty familiar with the chip card (credit card) changes finally happening in the United States. That’s right, we said, finally. Why now, when most of the Europe embraced the technology in 1994? Yes, the 90s! Maybe it’s because the U.S. ranked #1 in card fraud over the last five years (approximately; $8.6 billion), due to lack of security, the financial institutions think it’s a good time to start. 

EMV® chip technology is prevalent in Europe and much of the world, and U.S. financial institutions have taken note. The move from magstripe to EMV smart chip technology is finally happening with mandated compliance that only start a few months ago. What has finally lit that fire and pushed the embrace of EMV chip card security? How might it impact financial institutions, businesses, and the American consumer? Security concerns, regulations and current rates of adoption are all broken down as we explore the impact of EMV technology on financial institutions.

What Does EMV Stand For?

EMV, a registered trademark owned globaly by EMVco, LLC, is an abbreviation for Europay, MasterCard, Visa, which are the three companies that were the first to embrace the technology. EMV cards are also referred to as chip cards, smart cards, or chip and PIN cards. 

What about Security?

Are smart chips really that secure?

We all hear of identity theft and credit card scams on a regular basis. Will card not present scams and other issues continue to trouble smart chip credit card holders? Experts weigh in sharing that data on chip cards are more secure and less vulnerable to be copied or “skimmed” as compared to data on traditional stripe technologies will place a bullseye on the back of the U.S. If the U.S. were not to adopt EMV technologies, American consumers and businesses may find tthemselves more frequent targets of fraud and scams.

There are regularly published fraud statistics from banking and regulatory authorities that demonstrated that smart chip technology has been instrumental in fraud prevention. It has been found that EMV “reduces counterfeit and lost/stolen fraud in the world of physical points of sale (POS) and automated teller machines (ATM) as well as in card-not-present (CNP) scenarios where EMV provides strong dynamic cardholder authentication.” EMV cards incorporate embedded card risk analysis capabilities, advanced encryption, and offline and online authentication making traditional fraud scams difficult to perpetrate.

Why the Push for EMV Chip Card Technology?

Pressing demands on financial institutions follow those already pushed on U.S. retailers and eCommerce merchants. Retailers had to meet compliance for EMV technology at POS terminals in October 2015. Financial institutions (who provide ATMs, and ATM ISOs) are granted another year with their deadline slated in October of 2016, and U.S. Gas Stations (pay at the pump) have until October of 2017 to make the EMV migration.

However, EMV chip card technology, or smart chip credit cards, is nothing new. In How Ready for We for EMV?, it was found that only 1.5 percent of the U.S. had adopted the smart chip credit card technology as compared to 80 percent of Western Europe and 40 percent of Latin America. Adoption has lagged far behind other countries, and this mandated push will pull the U.S. into a standard payment technology embraced elsewhere. According to a Gemalto whitepaper, The Migration to EMV Chip Technology, the majority of countries have fully migrated or are undergoing the transition to smart chip technology. As seen in financial institutions, EMV chip cards were first only issued to customers that were also frequent travelers. However, at that time, we were far from full acceptance of the technology.

EMV chips provide real benefits for customers, businesses, and financial institutions. Take note that:

“I was pleasantly surprised, I really thought that there had been some solid progress made [but] the level of that progress was surprising” 

When adoption has occurred in countries, it has been noticed that fraud has migrated to regions that have failed to implement EMV smart chips. With the knowledge of widespread adoption in other nations, fraudsters may more likely target countries such as the U.S. if they fail to incorporate the additional security measures in chip technology. This has already happened with fraud numbers when we look at Malaysia in comparison to Thailand and the UK to mainland Europe.

Magnetic stripe technology is archaic in a global marketplace. Tens of millions of American cardholders have had issues while traveling abroad. Problems include attendants at POS refusing to take a magnetic stripe card and many more cardholders not able to be served at unattended terminals.

Implementation of smart chip technology will hasten the adoption of mobile and contactless payments. Devices that accept EMV technology are also able to accept contact and contactless devices. The installation allows merchants and institutions to securely accept these new forms of payment. These reasons and more make EMV chip card technologies a smart investment for financial institutions.

Is the Transition Complete?

With the liability shift coming into full force in October 2015. There has been some progress with merchants in the US., but there is still some way for financial institutions to go before all have transitioned from magstripe to EMV chip card technology. 2015 and 2016 have found financial institutions surveyed as to their progress to smart chip credit card implementation. Some respondents to a recent ATM Industry Association survey are busy working toward compliance with some folks waiting until the last minute to make the change. This survey or study of both members and non-members found that 61 percent of respondents said a likely 76 % to 100 % of ATMs operated will be prepared for the EMV chip card liability shift. When respondents were surveyed in 2013, a mere 12 percent of ATM operators had ATMs that could accept EMV cards. This enormous jump of 64 percent or more in readiness comes to some as unexpected.

“I was pleasantly surprised, I really thought that there had been some solid progress made [but] the level of that progress was surprising,” David Tente, executive director for the U.S. and Latin America at ATMIA in Sioux Falls, S.D.

A 2016 CSI Banking Priorities Study highlights the changes afoot and shows support for findings above. 100 bank executives were surveyed, and while growth and profitability are reported as top challenges, many bankers are determined to work on digital banking initiatives. This year’s CSI study showed an 8 percent rise in respondents planning on enhancements in mobile banking technology and omnichannel strategies. Steve Powless, chief executive officer for CSI, stated:

“Each year, we strive to keep financial institutions up-to-date on the latest industry trends and economic insight with the help of our annual banking priorities study. While some of the leading opportunities and challenges are consistent with our 2015 study, we are pleased to see new growth in other key areas, including mobile banking, omnichannel strategies, EMV implementation and integrated CRM software, as well as a continued dedication to customer service.”

Over the next 12 months, financial institutions plan to increase spending in the top three areas of information technology, EMV implementation, and regulatory compliance.

It is time for financial institutions to stop dragging their feet as EMV technologies are widely adopted on a global scale, and refusal only makes for increased susceptibility to fraud and reduced customer satisfaction. This technology can make financial transactions more secure and allow the U.S. payment system to be interoperable with other EMV chip card technology-enabled nations. 

Still have questions? 



 EMV® is a registered trademark in the U.S. and in other countries, owned by EMVCo, LLC.


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