EMV Credit Card Angst Continues

Beginning on October 1, 2015, point-of-sale (POS) systems in supermarkets were supposed to accept the new EMV credit cards for payment at checkout. It marked the start of a transition from magnetic-stripe cards to Europay Mastercard Visa (EMV) cards that have an embedded chip designed to provide more protection for shoppers against criminal tampering and take the liability away from retailers.

As we approach the one-year anniversary, it is clear that the transition remains uneven and still causes headaches. While many grocers now enable their shoppers to use EMV cards in the store’s checkout terminals, some are not able to. Why? Grocers may have upgraded their POS terminals for the cards, but the card networks have not certified the change yet.

I recently experienced this frustration in my hometown of Cleveland. The Heinen’s supermarket where I shop in the suburb of Brecksville accepts the EMV card with embedded chip. But the Giant Eagle store a few miles away does not – even though the upgraded terminals are in place.

“The certification process, which is mandated by the card networks, has experienced a number of delays that range from the card networks’ late delivery of technical code to other complications slowing the certification process,” said Peter Larkin, President and CEO of the National Grocers Association (NGA), “None of these delays are the fault of merchants, yet it’s the merchant who is facing an onslaught in new chargebacks as well as confusion among consumers who don’t understand why they can’t use their chip cards at their local supermarket.”

In a blog on its website, the Food Marketing Institute (FMI) reported that U.S. merchants will be hit with $5.8 billion in chargebacks in 2016, a 21 percent increase since 2015. In 2016, U.S. merchants were flooded with $260.3 million individual chargebacks, 17 percent more than in the previous year. FMI has compiled best practices for addressing these chargebacks in addition to providing materials from the card networks

While chip-enabled cards provide added protection for shoppers in stores, there are still security issues. Ben Woolsey, president/GM of CreditCardForum, told me that the chip only protects against card counterfeiters. “It does not address card-not-present fraud, which is a big chunk of total fraud.” Card-not-present transactions occur when consumers pay for goods over the phone or online, so the retailer can’t see the physical plastic.

Woolsey said the card networks are looking for the chip technology to reduce or eliminate card-present fraud in stores. Unfortunately, this makes card-not-present fraud more attractive. Financial experts expect online credit-card fraud to increase as more chip cards become operational. And that moves the liability back to the retailers at a time when online grocery shopping is increasing.