EMV Activity Rising Slowly but Steadily in the U.S.

Navigator Edition: January 2016
By: Stephen Kiene

Some industry observers bemoaned the slow EMV adoption in the United States in 2015. But while overall EMV transaction volume is low, the U.S. market has come a very long way in a very short period of time. Most importantly, stakeholders should acknowledge that migration to EMV is an ongoing and long-term conversion process, with significant risks for those that lag behind in adopting the global chip standard.

Issuer Conversion

First Annapolis estimates that 70% to 80% of all U.S.-issued credit cards have been converted to EMV, while conversion of U.S. debit cards (which typically have lower fraud rates than credit) is likely between 25% and 35% (see Figure 1). Card conversion is led by the largest banks and credit unions, but most FIs have accelerated EMV turnover, suggesting that substantially all general-purpose credit and debit cards will be EMV-enabled in the next 1-2 years.

Figure 1: U.S.-Issued General-Purpose Cards Converted to EMV by Year-End 2015

Figure-1_-US-Issued-General-Purpose-Cards-Converted-to-EMV-by-Year-End-2015Source: Public statements from issuers and networks, First Annapolis Consulting estimates.

Merchant Conversion

While card issuers were further along the path to EMV conversion in 2015, merchants are quickly catching up. Most of the largest brick-and-mortar retailers in the U.S. have made significant investments in new EMV hardware and have upgraded essentially all POS terminals with chip slots. Several of these large stores, led by Wal-Mart (which finished activating EMV for both credit and debit at the end of 2015), have completed EMV enablement at all stores (see Figure 2). Other national retailers have not yet completed EMV deployment or have not activated EMV functionality at all terminals. We expect these merchants to quickly begin accepting EMV at more and more stores as their certification, testing, and employee training is complete, likely reaching full enablement early this year.

Figure 2: Large U.S. Merchants Enabling EMV Nationwide by Year-End 2015

Figure-2_-Large-US-Merchants-Enabling-EMV-Nationwide-by-Year-End-2015* Note: All listed merchants have largely completed the hardware installation. Some terminals have not been activated / enabled.
Source: NRF, First Annapolis Consulting observations.

Transaction Migration

Based on conversations with several large card issuers, between 5% and 10% of card-present transactions on EMV-capable cards were “chip-on-chip” transactions (i.e., an EMV chip read at an EMV terminal) at the end of 2015, although some issuers reported higher rates reaching into the mid-double digits.

Several factors are driving low activity and acceptance three months following the October liability shift:

  • Longer-than-expected timelines for debit EMV certification in 2015 – Most merchants prefer consistent checkout processes for debit cardholders and credit cardholders. The Durbin-related delay in the EMV roll out for U.S. debit cards also had implications for merchant testing and certification timelines.
  • Holiday Shopping – EMV transactions have been widely reported to take several seconds longer than mag stripe, particularly when consumers and cashiers are still adjusting to the new transaction process. Many merchants delayed roll out of the new technology until after the holiday rush.
  • Low EMV awareness downstream – While large national chains were proactive in planning for chip cards, single-location merchants and small chains are often reliant on merchant acquirers to supply new technology and educate them on new processes. It will take longer for EMV to penetrate this long tail of the market.

The first two drivers are temporary, short-term obstacles, and will likely have limited effect on the market’s EMV acceptance rate this year. While merchant acquirers and their sales partners are working diligently to educate small retailers on the new technology, the low awareness among smaller merchants could have greater long-term impact as millions of small and micro-merchants still need to convert.

Looking ahead to 2016, every issuer interviewed reported that EMV activity (as a percentage of all transaction activity) is noticeably and steadily rising each month as more merchants enable EMV, and this trend is expected to continue.

As the U.S. EMV conversion continues, industry observers should maintain a long-term focus as issuers and merchants upgrade approximately 500 million active general-purpose payment cards and an estimated 12 million payment terminals. Most importantly, no stakeholder should delay implementation based on this early data: the ongoing market conversion will only increase the risk of loss for financial institutions and merchants that are late adopters of EMV technology. Throughout 2016 and beyond, we expect any issuer or merchant that deprioritizes EMV investment to become the target of a greater number of counterfeit fraudsters as these criminals seek to exploit the weakest links in the American payment system.

For more information, please contact Stephen Kiene, Senior Consultant,, specializing in Payments Strategy and Innovation.

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