Chip technology resulting in lower fraud rates, acceleration of mobile payment adoption, and easier international payment acceptance
When Visa first introduced a roadmap to bring chip technology to U.S. payments, it set out three primary drivers: prevent counterfeit fraud, accelerate the adoption of mobile payments, and enhance convenience and payment security for international travelers. In the five years since that journey began, there has been demonstrable progress in each area.
Counterfeit Fraud Rates Declining at Chip-Ready Merchants
Businesses that have completed their transition to chip terminals benefited from a 47 percent reduction in counterfeit fraud in the month of May compared to the same period a year earlier.ii
“Migrating the U.S. to EMV chip is a massive undertaking, requiring
coordination and collaboration between financial institutions,
retailers, and the thousands of service and software providers that make
our payments systems work,” said
One such effort reduces the time consumers spend at a chip-enabled checkout terminal. Visa developed Quick Chip, a solution that speeds transaction times to two seconds or less. Retailers that want to become Quick Chip-ready can implement the new technology in a matter of days. The technology has been successfully launched at New Leaf Community Markets, with more merchants expected to implement Quick Chip in time for the busy holiday shopping season.
Visa also took additional steps to help merchants and their service providers test and certify their terminal solutions more efficiently, and increased support, consulting, and training. Also, to mitigate the financial impact on merchants who are working to implement chip but have not yet completed the process, Visa modified its policies to temporarily cap the number of fraudulent transactions that issuers can charge back to non-chip merchants and their financial institutions. This has resulted in a 50 percent decrease in chargebacks since March of this year.
Digital Commerce Accelerating
The introduction of chip payment technology in the U.S. market has coincided with the introduction of secure mobile payment solutions such as Apple Pay, Android Pay, and Samsung Pay. Card and mobile-based payments use the same global security standards and encryption technologies, bringing greater flexibility to merchants who want to offer consumers the option to pay by either phone or card.
The growth in mobile adoption also enables solutions that empower consumers to take more control in securing their accounts and stopping fraud. Examples of consumer solutions include Mobile Location Confirmation, which lets account holders opt-in to allow the location of their mobile devices to be matched to the location of the transaction, as well as Consumer Transaction Controls, which allows consumers to determine the types of transactions that can be authorized and to turn on and off their accounts when cards are misplaced, lost, or stolen. Consumers can also use transaction alert services to receive real-time text or email notifications for charges in order to spot suspicious transactions as quickly as possible.
“The number of consumers worldwide who will own smart phones is expected to grow to 2.5 billion by 2019,” added Ericksen.iii “That provides a great opportunity to accelerate the adoption of chip payment technology and introduce new ways to authenticate consumers through technologies such as biometrics and device ID.”
Easier Payments for International Travelers
Bringing chip technology to the U.S. has also meant more consistent
payment experiences for U.S. consumers traveling abroad and foreign
travelers visiting the U.S. When travelers use chip cards, issuing
financial institutions can have greater confidence that those overseas
transactions are not the result of counterfeit fraud. Visa also requires
self-service checkouts to accept international chip cards without
requiring a PIN, making transactions at train ticket vending machines,
bike sharing stations, and parking meters both quick and secure. In
“Chip is an important investment in the payment system, not only in security but also in driving future innovation, and making payments easier for consumers,” said Ericksen. “The U.S. is clearly well on its way, and we’re looking forward to many more advancements ahead.”
i U.S. Visa chip cards and chip-enabled merchants, as
reported to Visa by client financial institutions for
ii Volume of counterfeit fraud at merchants with at least 80 percent of their total transaction volume made with chip cards at chip terminals, during the month of
iii Statista, 2016