The nationwide switch to chip cards is underway — by now, you’ve probably seen more than a few of your customers pay with a chip card. In fact, about 17 percent of the cards swiped on Square Stand or Reader now contain a chip, up from roughly 3.5 percent in January 2014. For now, the majority of the cards are still being processed as magnetic-stripe transactions (all chip cards also have a magnetic stripe on the back). But as sellers upgrade to EMV technology, more and more of these transactions will be processed via the chip on the card instead of the magnetic stripe.
So when will chip cards reach total ubiquity in the United States? While things are progressing at a steady clip, it’s not going to happen overnight. In other countries that have switched from magnetic-stripe cards to chip cards (Canada, Australia, and Brazil, for example), it has generally taken three to five years for EMV to reach market saturation.
The switch to chip cards is a Herculean effort. First off, there’s the swapping out of all those mag-stripe-only cards for chip-enabled cards. And when you take into account that there are roughly 1.2 billion active payment cards in the United States, that’s no small feat for issuing banks. Then, all the point-of-sale and payment terminals — over 8 million of them — are being upgraded to accept chip cards, an expensive process that’s going to cost anywhere from 8 billion to 12 billion dollars.
But things are moving along as expected, and in line with what we’ve seen in other countries. A big milestone here is the liability shift — the point at which sellers are on the hook for some types of fraudulent transactions if their point of sale isn’t equipped to read chip cards. In the United States, the EMV liability shift is set to occur on October 1, 2015. At the current pace of chip card issuance, we expect roughly 35-40 percent of cards to be chip-enabled by the time the liability shift hits (though this may change if issuers speed up or slow down their pace).
To see what the next few years might look like, we put together three things to create the visualization below: 1) Square data on chip card penetration in the U.S. over the last year, 2) projections based on how we’ve seen things go abroad, and 3) analysis from other experts in the payments industry.
Read more: https://squareup.com/townsquare/the-state-of-the-u-s-emv-migration-when-will-everyone-have-chip-cards/