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Basic math shows why chip cards are sending ripples through retail

You might not think the 20 seconds or so a chip credit card adds to a transaction is much more than an inconvenience that makes your line and checkout time longer, but some simple math shows it could have significant economic consequences.

Say you run, for example, a high-traffic business like a sandwich shop that processed 100 transactions per hour in the swipe era during a heavy lunch rush. If you add 20 seconds to each transaction, it would take an extra 34 minutes to hit 100 transactions per hour. In other words, in that hour, checkout efficiency would have fallen significantly to just 64 customers per hour. It’s as bad as cash, which Visa once lampooned as slow and inefficient (see the ad below).

The scale of these changes has ballooned in the past year, as credit card issuers transferred the liability of fraud to merchants on October 1 of last year, strongly encouraging the implementation of this new technology. According to USA Today, a recent National Retail Federation survey found 86% of merchants have put or are ready to put in the new terminals.

The speed bump for IRL transactions drives customers straight from the brick-and-mortar stores into the open arms of Amazon (AMZN) and other online retailers that save consumers time by design. In fact, USA Today pointed to a consumer survey that found the new payment system will result in 71% people going online for their 2016 holiday shopping. Perhaps this could be the push needed to actually get people to use alternative methods of payment like mobile payments of Apple (AAPL) and Google (GOOG), which are still not mainstream. In March 2016, a Fed survey found just 33% of consumers had made a point-of-sale mobile payment.

It’s important to remember the reason credit card issuers decided to make the push to chip cards—security. Since the chips are much harder to spoof and scam compared to a simple magnetic strip, the increased security can help companies avoid fraud and save money, although many have noted that the fraud will simply shift more online.

When we have more than a year of chip cards in our rear-view mirror and are able to see any economic consequences, it’ll be interesting to see whether avoiding scammers was actually worth it in the long run.

Ethan Wolff-Mann is a writer at Yahoo Finance focusing on consumerism, tech, and personal finance. Follow him on Twitter @ewolffmann.

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