Chances are, you’re one of the millions of Americans who has received a new credit or debit card in the mail in the last few months (if not, you will soon!). It looks identical to your old card, but with one exception: it has a small chip on the front.
These new cards are supposed to make transactions safer, but right now, many retailers aren’t equipped to accept them. The result is longer lines at the check-out counter as confused customers fumble with whether to use the chip or swipe their card as usual.
So why we do we have cards that retailers can’t accept?
The deadline for retailers to change to the chip-enabled payment systems was last October when U.S. credit card companies, including Visa and MasterCard, announced new liability rules. This meant that businesses had to switch over to the new technology or take responsibility for any costs incurred in the event of fraudulent transactions.
Chip cards use EMV technology (which stands for Europay, Mastercard, Visa), and are more secure than traditional swipe cards because they create a unique transaction code that cannot be used again. Cards with only a magnetic stripe use the same transaction code over and over, which makes it easier to skim information.
Despite the now passed deadline, The Srawhecker Group (TSG) released a survey in February estimating that only 37% of merchant locations were EMV ready.
“It appeared that some merchants delayed EMV migration completely until the holiday season ended to prevent friction and confusion at the checkout line,” said Jared Drieling of TSG.
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In addition to the delay in implementation, some retailers claim they have installed the card readers, but are waiting for the credit card industry to do their part.
“If you walk through a mall, you can see that there are chip card readers installed and ready to go but cards are still being swiped,” said J. Craig Shearman, spokesman for the National Retail Federation (NRF). “Once the retailer installs the card reader, the credit card industry has to send people out to certify the installation."
According to the NRF, the certification process has taken longer than expected, with some retailers waiting months to get their EMV card readers up and running.
One frustrated retailer who has been waiting for certification is Avi Kaner, co-owner of the Morton Williams supermarket in New York. In an interview with the New York Times, Kaner said he spent $700,000 on buying the necessary equipment, but has been waiting since October for the card readers to be certified by the credit card industry. Since his customers are unable to use the EMV credit card readers, Kaner is stuck paying thousands of dollars for fraudulent charges. (The October liability shift meant that merchants must pay for fraudulent charges if EMV card readers are not installed and working.)
One grocery store owner in Florida is even suing Visa, MasterCard and American Express for delaying the certification process.
“Our initial hope is that credit card industry will finally stop delaying and get enough personnel out there to complete the certification,” said Shearman.
Jason Oxman, CEO of the Electronic Transactions Association, which represents the payments industry, says that any delays in certification are more likely a result of retailer procrastination.
“The EMV migration was announced in 2011, and since then, major retailers like Walmart, Target and Best Buy have been working on the transition and are complete,“ Oxman told Yahoo Finance. “What’s happening now is that some merchants who put off the EMV migration for whatever reason are getting mad because they have fraud liability for the first time.”
Oxman says there are several pre-certified EMV card readers that retailers can purchase. However, if a merchant makes a change to the software, like adding a loyalty program, then they’ll have to wait for certification before the machine can be used.
“We’ve heard from payment agencies that the volume of merchants looking for certification has increased significantly in the last 60 days,” Oxman says. “It’s like Christmas shopping on Dec. 24, you can’t expect that there won’t be lines.”
TSG predicts that by June, consumers will be able to use their chip credit and debit cards at half of U.S. merchant locations. By 2017, 90% of merchants are expected to be EMV-ready.
While the retailers and credit card industry go back and forth, consumers at least don’t have to worry about being on the hook if their credit card information gets stolen.
Do you have a question about chip credit cards? Email us at firstname.lastname@example.org.