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EMV and the impact on user experience

by Tim Spenny , 20.02.2015

The only constant is change and this is particularly true for the payments industry. Very big changes are coming to the industry later this year and it’s going to have a ripple effect across the entire purchasing experience in the US.

On October 1st, there is a shift of fraud liability from the issuers of debit and credit cards, which are banks and other financial institutions, to retailers such as Target and Walmart. Although this doesn’t appear to directly affect consumers, the reaction to this shift in liability will change the way Americans pay for the things they buy.

Shiny, gold chip

If you haven’t already received a new debit or credit card with a tiny gold or silver chip imbedded in the card, you will be getting one soon. This embedded chip enables an authentication process known as Europay, MasterCard, and Visa (EMV) that helps authenticate purchases and thus, reduce fraud associated with using debit and credit cards. Although it isn’t 100% fraud proof, it is much more secure than standard magnetic strip technology. After October 1st, retailers are responsible for fraudulent charges if they do not have the proper payment terminal that can read this chip. Previously, card fraud was the responsibility of the financial institution that issued the card.

Naturally, card issuers, such as Bank of America, Chase, and Citibank, want to get chip cards into the marketplace as quickly as possible, to reduce their fraud risk. I received my first chip card, a corporate Diner’s Club card in 2014, and I have used it frequently in the US for purchases, meals, and other incidentals and it works perfectly; I haven’t noticed any difference in using the card to make purchases despite the embedded chip. Like my other non-chip cards, I swipe it or hand it to my server and everything is as it has always been. That is, until I tried using my chip card on a recent business trip to Europe where the experience was completely different.

How will the checkout experience change?

Chip cards and EMV technology is widely used across Europe. While these card terminals look similar to the ones commonly used in the US, the procedure for making purchases is very different.

The first difference I noticed was when I tried to use my chip card to buy business supplies at a European retailer. I inserted my card into the card reader and quickly pulled it out and waited for the purchase to process and a receipt to be printed. When nothing happened, I ‘swiped’ my card again, quickly putting it in and pulling it out of the card reader. As the line behind me slowly began to build, the cashier asked for my card and then she “dipped” it into the card reader and just left it there. She didn’t pull it back out. After a few seconds, a green light was illuminated on the terminal and I was able to remove my card from the card reader, a receipt was printed and I signed my name.

Those few seconds were used to authenticate the chip in my card using the EMV technology and approve the purchase. It seemed like a very long time compared to what I was used to, especially given the long line behind me. The experience reminded me of using an ATM from several years ago that would ‘eat’ your card and spit it back out once the transaction was completed. Like those ATMs of the past, dipping could also create the problem of consumers forgetting their cards in the terminals.

The other difference I experienced was when I attempted to pay for dinner at a restaurant. After handing the waitress my card to pay the bill, she asked me to come over to card terminal to enter my PIN code. Unfortunately, I had no idea what the PIN was for my corporate credit card. In fact, I couldn’t remember if I ever received a pin since it was a credit card and not a debit card. My card was rejected and I was forced to use my personal card to pay for dinner.

Requiring a PIN with a chip-embedded credit card is an extra layer of security is known as “Chip & PIN”. In essence, a thief now has to have the card, your PIN, and your signature in order to make a fraudulent purchase. The same PIN request also happened to me in a taxi and, again, I was forced to use my personal card.

Retailers in the US have known about this shift in liability, so many have upgraded their card equipment to accept chip cards. The real challenge for card issuers and retailers will be to educate consumers about the benefits of chip cards and how to use them properly at checkout. Measuring the effects that these new technologies have on the checkout experience and how to make the experience as fluid as possible is going to require consumer research to understand how to best communicate the benefits of chip cards and EMV technology.

Opportunity for contactless payment technology

Chip cards do open the door for contactless payment technologies like PayPal, ApplePay, and the MCX to position their payment apps as being easy, fast, and secure. Seconds matter at checkout, especially when there is a long line behind you, and this benefit sell could go a long way to boost adoption of these payment alternatives. The roll out of wearable technologies with the ability to make payments could also contribute to speed and ease at checkout to increase adoption.

The days of swiping your credit card are coming to an end and the requirement to dip the card and enter your pin to complete the transaction is fast approaching. Have the card industry and retailers underestimated the effect on the consumer experience? Have they done enough to educate the public in advance of these inevitable changes? Is the competition to traditional payments going to seize this opportunity?

Tim Spenny is Vice President on GfK’s Financial Services team in North America. He can be reached at tim.spenny@gfk.com.