It’s been seven months since Visa and MasterCard’s Oct. 1 chip-card transition deadline and…no one cares. That includes retailers, only a third of which have upgraded at least 90 percent of their stores’ terminals for the new cards. Worse yet, 42 percent of retailers haven’t upgraded the terminals in any of their stores, according to a survey of 55 major retailers and 1,000 individuals conducted by my company, WalletHub.
As for consumers, 56 percent of people don’t care if a retailer is chip-card compliant and 41 percent say they either don’t have or don’t know if they have a chip-based card. Perhaps there’s a connection. Let’s consider that notion further as well as explore other causes and ramifications of this chip-card power outage:
1. No Awareness Marketing and Low Financial Literacy: If you ask people on the street what “chip-and-signature” means or why the departure from the magnetic stripe is significant, you’ll be hard pressed to find someone who can answer correctly. After all, 62 percent don’t know whether chip cards or magnetic stripe cards protect them better, according to the WalletHub survey.
Most people are starting from quite a valley in terms of monetary know-how, considering our societal lack of financial literacy, and little if anything was done to educate people about the changes being made to the backbone of our payment infrastructure. Perhaps it wasn’t cost-effective or absolutely necessary. That very well may be. But building buzz is inherent to such a strategy, as you can’t be excited about something you neither know about nor understand.
2. Merchants Underestimated Fraud’s Burden: Fraud probably doesn’t seem like too big of a deal when someone else is footing the bill, so it’s possible that uncompliant retailers simply didn’t realize what they were in for. As part of the transition to chip cards, merchants who failed to switch over by Oct. 1 now face liability for fraudulent charges that used to be covered by the card issuers. In a class-action lawsuit recently filed in U.S. District Court for the Northern District of California, one retailer suing credit card companies and banks argues that their credit card chargebacks have increased from roughly $89 in a year to $10,000 in five months.
3. Delays and Failed Attempts Are Nothing New: This isn’t the first time since the magnetic stripe was introduced in the 1970s that its impending demise has been predicted. Remember the American Express Blue Card, with its accompanying card reader, intended to make online shopping safer? What about RFID-enabled cards? And the initial rush into the contactless-payments space a few years ago? So forgive retailers for adopting a “been there, seen that” attitude and an expectation for chip cards to fail like their predecessors.
The same is true for the consumer, albeit for slightly different reasons. After all, if you had to wager whether a particular bill would be passed into law or a public project — heck even a home remodeling — would completed on schedule, the smart money always takes the pessimistic position. So not seeing results from a low-visibility payment-industry project isn’t the type of thing likely to stir many people up.
4. Results Are Tough To Measure: The purpose of chip cards is to reduce card fraud, which is an effect that takes months and years to quantify. What’s more, the criminal side of the equation is evolving right along with security, which could also skew the numbers. And from a personal perspective, if you fall victim to fraud in the future, will you really care if the rate of such crimes is down some impressive percentage? Because smartcard technology isn’t going to drive fraud into extinction.
At the end of the day, despite the confusion and obstinance surrounding the chip-card transition, it’s simply too late to stop its momentum. Before long, all credit cards will have embedded computer chips and the long processing times that many early adopters have experienced will shorten. I expect full market saturation within two years.
The good news for consumers is that credit cards will be both increasingly secure and easier to use abroad, and the blanket $0 liability guarantees for unauthorized charges that we’ve always enjoyed will continue to remain in place.
Odysseas Papadimitriou is CEO of the personal-finance website WalletHub, which offers free credit scores, full credit reports, 24/7 credit monitoring and customized money-saving advice.