Credit Card Processors: The Weak Spot in EMV Adoption

NEWS ANALYSIS: Small businesses testifying before the House Committee on Small Business shared tales of woe and pleaded for chip-and-PIN technology.

credit card EMV chip

It's rare for witnesses invited by both political parties at a U.S. Congressional hearing to be in unanimous agreement—so rare that when I settled in to watch the testimony before the U.S. House of Representatives Committee on Small Business, I fully expected to see the committee and its witnesses at loggerheads regarding EMV card adoption. I was wrong.

First, as is always the case with the majority party, came the witnesses for the Republicans. There, the witnesses included a series of small-business owners and managers, all of whom bemoaned the lack of information, and in fact, the lack of any communications regarding the adoption of EMV card technology, in which credit and debit cards are outfitted with a chip that eliminates the need for the magnetic stripe technology that until now has been in common use in the United States.

While the experiences of the small businesses were different, they all found information wanting. Only one witness, Jami Wade, owner of Capital City CORK, a restaurant and wine store in Jefferson City, Mo., had been able to successfully convert her point-of-sale system over to accept EMV-equipped credit cards. While she was successful, she made it a point to explain to the committee that her credit card processor had an office down the street and was a regular customer in her restaurant. She also said that she took proactive action to make sure she was ready for the liability shift, and ready to accept cards with chips when they started showing up.

The other small businesses testified that they had been unable to complete the transition. In one case, gallery owner Keith Lipert, from Washington, D.C., said that, so far, he's not even been able to get his credit card processor to discuss using cards with chips. The other witnesses, including convenience store and gas station owners, had similar stories. They were struggling to get information on accepting cards with chips, but even worse, they were deeply concerned about the rarity of EMV cards with PINs for security.

The Democrats' witness, Ed Mierzwinski, consumer program director and senior fellow for the U.S. Public Interest Research Group, said that his research supported the positions of the other witnesses. He added that it appears to him that credit card processors are "slow walking" the process, and taking advantage of only those parts of the EMV conversion that benefited them.

This meant that card processors are adopting EMV in its chip-and-signature form, which prevents counterfeit cards from being used, Mierzwinski said. However, the card processors are not adopting the use of PINs, which are more secure and prevent the use of lost or stolen credit cards, because it would reduce their profits, he added.

Another witness said that the liability shift was meaningless because card processors were already charging merchants for disputed charges even when their actions were contrary to the law.

The liability shift is a practice put into place by the major credit card issuers, effective Oct. 1, that changes the way fraudulent charges are handled. Before Oct. 1, the credit card issuers absorbed bogus charges as long as the merchant followed the rules and met compliance requirements. After the shift, merchants that accept a card with a chip that turns out to be bogus are stuck paying for the charge. The only way they can avoid that is by having, and using, a terminal with a card reader.

Wayne Rash

Wayne Rash

Wayne Rash is a freelance writer and editor with a 35 year history covering technology. He’s a frequent speaker on business, technology issues and enterprise computing. He covers Washington and...