Smaller merchants may miss Visa Inc.'s first deadline for chip-card acceptance by as much as two years, though larger merchants should meet that deadline easily.
Merchants that handle 75% of their annual Visa transactions as of October 2012 through chip-accepting terminals will not have to validate their compliance against the Payment Card Industry data security standard, Visa said Aug. 9. They will still be required to adhere to the standard, which describes how companies must protect payment data.
Visa says it hopes to accelerate the U.S. migration to the EMV Integrated Circuit Card Specifications to support more secure payments worldwide and ready the U.S. marketplace for the arrival of Near Field Communication-based mobile payment technology.
The nation's largest merchants already are "mostly poised" to upgrade and replace payment terminals to accept contact and contactless EMV cards at the point of sale, says Randy Vanderhoof, executive director of Smart Card Alliance of Princeton Junction, N.J.
"It won't be a big deal for large merchants by next year to ensure that most of their terminals can accept [contact and] contactless payment because the majority are already equipped for it or are moving in that direction," Vanderhoof says. "But smaller merchants more likely will wait to upgrade to contactless until the time they would ordinarily replace terminals."
By October 2015, merchants' acquirers could be made liable for fraudulent transactions on chip cards if merchants do not have the proper readers in place, Visa said. Currently, issuers are liable. Fuel-selling merchants will have until October 2017 before the liability shift affects them.
The date Visa set for its liability shift "is quite aggressive, given the size and diversity of the U.S. market," Vanderhoof says. "As with any large group, it's almost inevitable that some large merchants will underestimate the potentially huge task of changing all their back-end systems to be EMV-ready."
Visa in 2004 announced similar EMV-adoption incentives in Canada. But when the liability-shift deadline approached last year, members of the payment industry asked for a postponement because many were not ready. Visa and MasterCard Inc. postponed the liability shift until March 31, 2011.
Although certain merchants may find themselves racing to meet Visa's 2015 liability-shift date, the majority are likely relieved to finally have a clear path to follow in implementing payment-terminal upgrades, observers say.
"Merchants are generally going to be happy to finally get some guidance on what the future holds as well as some incentives to move forward on contactless and EMV technology at last," says Jose Diaz, director of technical and strategic business development for Thales e-Security Inc. of Weston, Fla.
"Merchants that implemented contactless-payment technology in the U.S. five years ago were left hanging because overall penetration remained low, and there was no reason to move forward with it," Diaz says. "Now there are real incentives, which are going to restart the momentum for U.S. merchants to upgrade to new payment technologies."
