Conversions in the payment world are never easy, especially when they are global in nature. Each domestic market is unique when it comes to infrastructure, issuer, and merchant related costs. These complexities have been amplified for the past decade, as separate card markets have migrated to new EMV (Europay MasterCard Visa) chip card standards. Adoption rates have been very uneven on a regional basis, causing a great deal of anxiety as to why some major players have delayed, most notably U.S. issuers and acquirers.
Visa recently announced new incentives to move the process along in its region, but the timetables stretch out over the next four years. Conversions tend to follow very similar paths to their respective conclusions, but the actual timelines can be several years. The U.S. market has been loath to move to chip card issuance and acceptance because the financial benefits are not there. Fraud has been controlled, and no one sees where there can be any benefit that will offset enormous one-time and recurring operating costs for processing chip cards. International acceptance issues abound, but they are not significant enough to drive the migration process.
The first step for a typical conversion process is to announce standards for those willing to be first in line. If the business case is compelling, then both issuers and acquirers will march in step to a favorable conclusion. Step 2 usually specifies a timeline for complete conversion. Step 3 provides incentives to speed the process on to critical mass figure status, but Step 4 typically extends deadlines, but also establishes financial penalties of some type to coerce the laggards to get on with it.
Visa’s new rules expand a migration roadmap that was put in place in August of 2011 to include both ATM’s and Debit cards. The original migration program consisted of three components — providing incentives for businesses, building an infrastructure for chip acceptance, and shifting counterfeit fraud liability to merchants. The new deadlines are as follows:
- Effective April 1, 2013, a liability shift will apply to all qualifying transactions taking place in Australia and New Zealand;
- Effective April 1, 2015 – U.S. third-party ATM acquirer processors and sub-processors must be able to support EMV chip data;
- Effective October 1, 2015 – Liability will shift in Asia Pacific, excluding China, India, Japan, and Thailand;
- Effective October 1, 2017 – Liability will shift in China, India, Japan, Thailand, and the U.S.
If you are following the steps closely, the system has reached Step 3. Critical mass has already been achieved in some regions, but not others. A year ago, Visa touted that one million chip cards had been issued in the United States. That figure may sound substantial, but there are over 600 million cards in the U.S. market. Liability shifts have been defined, which is a good benchmark, but there will most likely be extensions, followed by severe penalty assessments to complete the process.
The good thing is that great progress has been made, but expect more delays before chip cards are a completed global reality.