US debit chips disappoint; mobiles expected to blossom

US debit chips disappoint; mobiles expected to blossom

America's move to EMV is being hampered by slow merchant adoption, with chip cards accounting for just four per cent of all debit transactions, according to research from the Pulse network.

Last October the liability for fraud-related losses switched to retailers that have not upgraded their hardware for EMV. By the end of 2015 about a third of all debit cards had chips with just 45% of issuer issuing EMV plastic, far below the 90% that had said they would a year earlier.

And even among Americans with chip debit cards, only 11% of transactions were at chip-enabled terminals, with the rest either at old-fashioned mag-stripe checkouts or online. When taking into consideration all debit card transactions, chip accounted for only four per cent, although Pulse does note a triple digit growth rate year-over-year.

The patchy rollout is causing confusion and consternation among American shoppers, summed up last week by a tweet that went viral, racking up 55,000 retweets:

Meanwhile, the Pulse research shows the rising availability of mobile payments. By the end of 2015, two-thirds of issuers had debit cards eligible to be loaded into a mobile wallet - more than 100% up on the previous year.

Apple Pay dominates the market, with approximately 3.5% of eligible debit cards loaded, compared to 0.2% each for Samsung Pay and Android Pay. However, cardholder usage was higher for Samsung and Android in January 2016, averaging 1.8 and 1.7 transactions per enrolled card per month, respectively, compared to 0.7 transactions for Apple. Combined, the three 'Pays' generated approximately eight million debit transactions per month at that time.

Tony Hayes, partner, Oliver Wyman, who co-led the study, says: "Issuers foresee a near-term boom in mobile payments - nearly half of issuers project mobile payments to make up over 25% of debit transactions in five years’ time. That would make mobile a primary payment method."

Comments: (2)

A Finextra member
A Finextra member 09 August, 2016, 18:391 like 1 like

How is this still even a thing?

I just returned from two weeks in Europe and EMV is ubiquitous on the continent and has been for years now. Meanwhile, we Americans -- who invented the technology in the first place -- continue to pay higher interest rates and fees to cover credit and debit card fraud. A modest proposal: remove the mag strip from new cards and force retailers to accept EMV instead.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 10 August, 2016, 18:53Be the first to give this comment the thumbs up 0 likes

America has very low tolerance to friction compared to RoW. Not surprisingly, as I'd highlighted in Mitigating Fraud Does Not Pay The Bills, the migration to EMV is meeting with severe resistance.