By the end of 2015, approximately 59 percent of U.S. point-of-sale locations will be chip-capable, says Aite Group.
This finding and others are included in an upcoming Aite Group research report, EMVelocity: Outlook for POS Re-terminalization and Mobile Payments. Based on interviews with merchants, acquirers and processors, and other key players in the ecosystem, the report conducts an in-depth study of the U.S. point-of-sale evolution.
“It’s good news that the pace of implementation has picked up”
In addition to the forecast for chip-enabled terminals, the study includes important findings to help guide the industry and accelerate implementation in the United States.
Here are some of the initial findings:
- Awareness of the migration to chip among small to mid-size U.S. retailers has increased with two-thirds of merchants aware of the standard. This is an improvement in a fairly short time frame, but a significant awareness gap still needs to be addressed for the remaining one-third of merchants who are unaware.
While nearly all large U.S. merchants have either begun or completed their conversion to chip-capable terminals, a large percentage of small to midsize U.S. merchants are either undecided or not planning to upgrade their POS infrastructure in the near future. In short, there is a clear and urgent need for aggressive and ongoing education among the small business community.
- Among those who are aware, 61% have either begun work or have already completed implementation.
- For those merchants who are aware and planning to upgrade their POS, a fairly large number have begun implementation. And the pace of implementation is accelerating, with 86% expecting to be chip-enabled by the end of 2015.
While the Aite Group report shows that the implementation rate has accelerated dramatically, concerns remain about smaller merchants' awareness of the chip migration as well as the likelihood that many midsize merchants will be able to convert in time for the liability shift. Merchants are currently protected from the US$3 billion in counterfeit credit card fraud at the point of sale (a number that will grow to US$3.6 billion by the end of 2015). As of October 2015, a portion of this burden will impact merchants who don’t upgrade. This fraud will disproportionately affect small and midsize merchants that sell fungible goods such as gift cards, jewelry, and electronics and who will lag in upgrading their terminals.
Beyond EMV chip, terminal providers state that nearly all terminals being shipped at this time incorporate NFC, helping to enable the mobile payment ecosystem. In another disconnect, however, only about one in five smaller merchants are aware that their chip terminals include NFC. The report describes the potential for NFC-enabled mobile payments to incent accelerated re-terminalization, acting as a complement to the mitigation of fraud risk that the chip delivers.
“It’s good news that the pace of implementation has picked up,” says Thad Peterson, senior analyst with Aite Group, “but when the liability shift occurs, nearly half of all merchants will now be vulnerable to counterfeit card fraud, and the liability will be on them. Every organization in the payments space needs to increase its efforts to educate and inform the merchant community about the importance of moving to EMV chip and the value of implementing NFC.”