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Will the U.S. be ready with secure chip cards and payment terminals?

Matt Hamblen | Jan. 28, 2015
Adoption is either 'impressive' or 'so behind,' depending on whom you ask.

There's no agreed-upon estimate of the number of payment terminals installed in the U.S. that support both chip cards and NFC-ready phones. However, terminal maker Verifone has said more than 70% of terminals it sells in the U.S. support both NFC phones and chip cards.

Whether many merchants will turn on the ability to accept NFC smartphone payments remains to be seen. A consortium of large retailers, including WalMart and Best Buy, called Merchant Customer Exchange (MCX) will unveil a competing payment system called CurrentC by mid-year that relies on QR codes to make payments. Many of those merchants will turn off NFC payment capability in their terminals, McKee said.

When the Oct. 1 liability shift deadline comes around, McKee said that terminals supporting EMV chip cards "will be far from ubiquitous." Some large retailers will be ready, he said, but not small and medium-sized stores. It will take until 2017 or beyond to see terminal penetration rates of 90%, he estimated.

The EMV-Connection Web site says there are 12 million point-of-sale terminals in the U.S. and 1.2 billion payment cards. As of December 2013, only 20 million chip cards had been issued to U.S. consumers, according to the site.

McKee said one reason that adoption of chip cards has not moved faster in the U.S. is that merchants expected the card processors to extend the Oct. 1 deadline. But then, in late 2013, the Target breach "started a frenzy of activity" toward chip card adoption, he said.

MasterCard's Barr, a native Australian, said chip cards are so prevalent in his country that one of every two transactions is done using a chip card. In all, 80 countries have migrated payment systems to the EMV standard. "The U.S. is not in the avant garde and is one of the last major geographies to convert," Barr said. However, he added, "We're seeing good retail brand pickup," including Chevron and Disney.

Both Barr and McKee said that MCX could blunt the use of smartphones with NFC for more secure payments, at least for a while, by setting up the CurrentC payment system.

McKee said MCX claims to represent more than 100 retailers in 110,000 locations with control over a third of U.S. consumer weekly spending. "It's unfortunate the way MCX is going about it, since the last thing you want is to create confusion for customers at the point of sale," McKee said. "Customers should have the option to use the payment system they want."


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