The Akron Legal News

Many retailers slow to adapt new chip credit card technology

ALLISON SLONAKER
Special to the Legal News
Published: January 26, 2016

Even months after the Oct. 1 deadline, a number of retailers are still slow to enable the technology to read new EMV computer chip-based credit cards, according to a ConsumerWorld.org survey.

The deadline was established by credit card issuers to retailers in order for them to adopt the new systems.

As of Oct. 1 retailers that process a transaction of a chipped card without using the new more secure system are held responsible for any fraud losses.

The chip technology was created to reduce the risk of fraud among the credit card transactions.

“The reasoning was the security of the payments network — it was thought that magnetic stripe cards were easier to duplicate and use when stolen. The data on a magnetic stripe card is static, while EMV cards have dynamic authentication,” said James Thurston, vice president of public relations at the Ohio Bankers League.

Of the 48 retailers surveyed by ConsumerWorld.org, 75 percent have not enabled the chip reading technology chainwide, even though some already have the slot reading terminals.

Only 11 of the retailers have the new terminals and have enabled the chip reading technology chainwide. Those retailers include Target, Walgreens, Home Depot, Macy’s and Best Buy.

Kroger, Whole Foods, Bed Bath & Beyond, Petsmart and CVS are among the retailers surveyed that have the new terminals, but have not made the new chip reading technology operational.

To use the chipped cards, customers insert the chip end of the card into the slot of the checkout terminal.

The card remains inserted into the slot until the transaction is completed, which allows the terminal to read and authorize the chip.

Thurston said because it is difficult to counterfeit the new EMV cards, they are more secure than those with the magnetic stripe.

“The EMV-enabled point of sale device communicates with the chip inside a customer's EMV card and makes a determination whether or not the card is authentic. It then prompts the customer to sign or enter a PIN to validate that they are the actual card owner,” he said.

The retailers were questioned and observed with in-store spot checks between Dec. 1-5.

One of the large retailers from the survey, which has fully implemented the system, said it is a very complicated and expensive process to properly interface with all the card networks, which could be why stores with the card slot terminals have not yet enabled the system.

Other reasons provided by the retailers in the survey include they are still testing the software, stores got specifications late from some of the card networks, some card networks are slow to certify retailers’ systems, stores didn’t want to make system changes during the busy holiday shopping season, some need to change the module inside the card-slot reader, and some are only partially through rolling out the system to stores.

There has also been a bit of controversy among the retailers with the introduction of the new chip cards.

Some of the retailers from the survey question the security of the new cards, while banks have been criticized about how the new cards only require a signature rather than a pin number.

Retailers such as Target and a group of state attorney generals have urged for the adoption of using both the chip and a PIN.

However, Thurston said the individual retailer is able to determine this with which system is used.

“This is completely dependent on the point of the sale device that an individual retailers has in place and it’s up to the retailer to determine which system they use,” he said. “Some are chip and signature while some are chip and PIN.”

Thurston believes the consumers will soon become accustomed to the new systems and doesn’t seen any problems in the long run.

“It takes about a week for the average consumer to get used to the new payment method, so long term there should be no real issues,” he said.

Another issue the retailers have had with the new cards is transactions take longer with the chip inserted than swiping the magnetic stripe.

The Europay Mastercard Visa credit card technology was first written in Europe in the early 1990s and has been used for around a decade, according to Thurston.

The U.S. was the last major market using the magnetic stripes, but bank industry analysts from Consumer World believe that 70 percent of credit cards will be chip-enabled by the end of the year.

Thurston agreed and stated the number could be even higher due to the credit card issuers established deadline.

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