FARGO — They’re in most everyone’s wallets, but the next generation of credit and debit cards aren’t accepted everywhere — long after the deadline for merchants to stop swiping and start reading chips.
EMV cards, short for Europay-Mastercard-Visa, have been around since 1994 and used in many countries since the early 2000s. But the cards, which have an embedded chip that encrypts transactions and boosts security, are relatively new in America.
Switching to EMV has been in the works for years, gaining urgency with big data breaches, including the 2013 Target breach that affected 40 million customers.
Instead of requiring the change, the U.S. opted for a liability shift on Oct. 1, 2015 — after that, merchants unwilling or unable to accept new cards were liable for fraudulent charges when the lower-tech magnetic stripes were swiped.
“The risk is not that big yet, but it’s growing,” said Dan Fisher, president and CEO of Fargo-based technology and payment consulting firm Copper River Group.
Nearly 11 months later, Fisher said only half of America’s point-of-sale terminals accept chip payment.
Even merchants that want EMV might not be capable yet, according to Bill Russell, executive vice president of banking services for Bell Bank.
Heavy demand led to long delays in getting new equipment, he said, while chains might require companywide software upgrades before the new readers work.
“It’s a combination of all those things that has made the accessibility that’s out there so low,” he said.
It’s also a complicated and time-consuming change, according to Carrie Lick, interim deposit administration and serving solutions manager for Gate City Bank.
“There’s more involved than just plugging it in and dipping your card,” she said. “Retailers have to install special software and go through a certification process.”
Fisher said the processors that merchants and financial institutions use for card transactions are a big reason for the delayed rollout. Many processors weren’t ready on time or have been slow to change.
That’s why customers may be asked to swipe their card even when a store has chip-reading terminals — the machine is ready, but the processor or store software isn’t.
Banks generally wanted EMV as early as possible because of the liability shift, Fisher said. That’s a big deal when card fraud topped $11 billion globally in 2012 and counterfeit card fraud was on the rise in America.
In countries that went to EMV, banks saw a 40 to 50 percent cut in debit card fraud, he said.
Bell Bank started issuing chip cards last fall, and Russell said the bank has already avoided losses it would’ve been liable for in the past — the transactions wouldn’t have been approved if the retailer had used a chip-reading machine.
Wurst Bier Hall would face “massive” upgrade costs, according to President Lisa Meyers, so the restaurant isn’t going to buy new readers and software anytime soon.
“We’re going to wait until we absolutely have to,” she said.
Dan Hurder, too, isn’t worried about accepting EMV. The managing partner of Great Plains Hospitality, which operates The Boiler Room, Sazerac Alley and Barbacoa in Fargo, said it would cost $6,000 per restaurant.
There’s another deterrent: EMV transactions take several seconds longer to process than swiping, a delay that Fisher said is warranted by the boosted security, but one Hurder said adds up to a big problem.
“We’ve talked about scenarios in which you get a group of 12 that comes in and everyone’s on split checks and everyone has a chip reader,” Hurder said. “Yeah, it’s only 20 seconds but times 12 transactions, you’re now standing there processing cards for 240 extra seconds. That’s four minutes that you’re not on the floor taking care of other tables.”
Regional supermarket chain Hornbacher’s started rolling out chip readers at its stores this spring. Customers weren’t really asking much about EMV compatibility before the change, but President Matthew Leiseth said it was a chance for Hornbacher’s to be proactive while also replacing hardware and software at the end of its normal life cycle.
“For us, it was about making sure that we had the latest technology, and the reality is with the new chips, it protects the customers that have them,” he said.
Brady’s Service Center in south Moorhead, Minn., is currently replacing its gas tanks and pumps, and owner Brady Olson said the new pumps will have chip-reading equipment. But he’s not sure if EMV will be accepted at first because the software and network might not be ready.
Even when that happens, Olson wonders why the country isn’t fully committing to the most secure technology — chip plus PIN — which adds an extra security measure beyond signing that also bears potential higher costs for some credit card companies and merchants.
Consumers can use chip plus PIN with debit cards, entering their personal identification number rather than signing, but American credit cards haven’t yet moved to that more secure standard for many transactions.
“The frustration would be why spend this kind of money to not do it properly?” Olson said.