The Grinch is visiting fewer small businesses this holiday season. Visa reports that payment card fraud is declining, at least for merchants who are making the switch to point of sale and payment processing systems that accept EMV chip cards.
First, a quick refresher.
EMV — short for Europay, MasterCard and Visa, the technology’s original developers – is a standard for smart cards and payment terminals. Unlike traditional magnetic stripe cards, which can be easily copied or “cloned” using handheld skimmers, EMV cards feature an embedded chip that makes them much tougher to counterfeit and enables per-transaction authentication and validation.
It took a while for the technology to catch on in the U.S., but after some high-profile breaches and the so-called “liability shift,” EMV-enabled cards are now an increasingly common sight. And that’s good news for small retailers.
EMV Use on the Rise
Visa has been tracking the impact of the EMV card rollout. A recent study from the company revealed that there are currently more than 388 million Visa chip cards in circulation, split between 208.3 million debit cards and 180.6 million credit cards. In just a year, the company has more than doubled the number of Visa chip cards out in the marketplace.
Mirroring the sheer increase in the number of smart cards in consumers’ hands, EMV-based transaction rates are also up.
Last month, there were 771 million Visa chip card transactions, a whopping 453 percent increase over October 2015’s figures. In terms of payment volume, that translates to $39.7 billion compared to just $8.9 billion last year.
New Jersey leads in merchant chip adoption (48 percent), followed by Pennsylvania (44 percent) and Florida (43 percent). New York (43 percent) and California (43 percent) round out the top five.
Last year at around this time, 592,000 merchants in the U.S. accepted chip cards. Today, that number is now 1.72 million, a 191-percent increase.
All told, more than a third (37 percent) of all U.S. storefronts accept EMV cards. Among those, 80 percent fall into the small and midsized business category. Citing data from Aite Group, Visa’s report states that most merchants (84 percent) who aren’t currently using EMV are planning or have already begun the process of upgrading their systems.
Better yet, fraudulent activity is dropping just ahead of the busy holiday shopping season.
Fraud Rates are Falling
Compared to last year, Visa has observed a “43-percent decrease in the amount of counterfeit fraud” among merchants who have upgraded to EMV-compatible payment systems, Stephanie Ericksen, vice president of risk and authentication products at Visa, told Small Business Computing. Currently, EMV-compliant merchants represent 41 percent of Visa’s in-store payment transaction volume.
It’s encouraging news, but the benefits of embarking on an EMV upgrade extend beyond enhanced security.
Often, when upgrading their payment terminals, merchants are provided “access to more ways that customers want to pay,” said Ericksen. For example, that shiny new point of sale terminal may support contactless payments. Additionally, EMV chip card technology operates on many of “the same rails — the same infrastructures — that enable mobile payments,” opening up even more payment options for shoppers, she added.
Visa has also been working on speeding up the process of paying with EMV cards at the register.
“In April 2016, Visa announced Quick Chip for EMV, a technology that helps speed up checkout times by streamlining card processing. Once a merchant’s chip terminal is updated with Quick Chip, customers will be able dip and remove their EMV chip card from the terminal, typically in two seconds or less, without waiting for the transaction to be finalized,” explained Ericksen in a company blog post.