Many of you have probably started to see these tiny chips appearing on new versions of your debit and credit cards...so what's the big deal?
The big deal is that according to a recent story in the Wall Street Journal www.wsj.com - "Some 575 million of the new cards--representing about three-quarters of U.S. credit cards and about 40% of debit cards--are expected to be in the wallets of American consumers by year-end, making it the biggest rollout of new cards in decades." While the chip cards have been in use in Europe, Asia and Canada for years, the program is now hitting the US and has an October deadline that has many smaller banks and retailers scrambling to be in compliance. Retailers must upgrade or replace their payment terminals to accept the new cards. Come October, under certain circumstances, the liability for fraudulent transactions will shift to the retailer from the issuing banks. With the new payment terminals, the chip cards are dipped into the reader vs being swiped like a traditional mag stripe reader.
One card manufacturer - Oberthur Technologies claims on their website that "The 2013 Federal Reserve Payments Study reported that in 2012, $2.1 billion – or 57 percent – of total credit card fraud was committed through card-present transactions like counterfeiting, lost or stolen cards, mail fraud and identity theft. In 2013, the U.S. alone accounted for 51% of worldwide payment card fraud costs." That's a big deal!
Oberthur is a French company but their plant in Exton, PA is working like crazy to keep up with the demand for new cards - to the tune of a capacity of 20million cards/month being produced! Employment at the plant is up 68% since 2013 and they are now running round the clock to keep up.
According to the Oberthur website - 95% of payment terminals in Western Europe support the new EMV cards (Europay, MasterCard, Visa - EMV is the global standard for integrated circuit cards or "chip cards") while only 14%, yes 14%, are EMV compliant in the US. That's 14% of 11.8 million terminals! That's a big deal! The exposure for continued fraudulent activity is huge.
So with only a fraction of the payment terminals able to support chip cards, tens of thousands of retailers falling behind and many smaller banks already admitting that they can't issue the new cards until next year there are clearly some potential impacts to the supply chain.
As I like to talk about all things related to people, process and technology, this EMV mandate certainly has lots of complexity to it, but at the end of the day, let's not forget about one of the apparently simpler tasks - think of all of the retail associates that have to be trained to help customers with the new terminals and cards and politely remind them to "Dip please, do not swipe".