U.S. merchants will upgrade to a new chip-and-PIN credit card standard fairly quickly as they race to meet a 2015 deadline set by MasterCard and Visa.
Over half of terminals will accept chip-and-PIN cards by the end of 2015, according to BI Intelligence estimates, based on Aite Group data.
- The number of active EMV terminals will rise from 1.5 million in 2013, to 12.4 million by 2017.
- That means that EMV penetration of checkout systems will increase from 14% in 2014 to 87% by 2017.
MasterCard and Visa have set a 2015 deadline for when credit cards will have to phase out the old authorization process based on “swipe-and-sign,” and switch to the more secure, European-style “chip-and-PIN” system, which requires credit cards to carry a special chip, and customers to enter a PIN number instead of signing. This system is known as EMV, which stands for Europay, MasterCard, and Visa — since they originated the standard.
At BI Intelligence, Business Insider’s paid subscription service, we have been tracking the payments and credit card industries — including EMV, mobile payments, and cyber currencies — in our daily charts, exclusive to subscribers. We published our insights in a recent report, “How Tech- And Mobile-Centric Players Are Transforming The Credit Card Processing Industry.”
EMV is a payment card security standard that is meant to reduce fraud at bricks-and-mortar stores, and generally makes payment cards much more difficult to clone for fraudulent transactions. The back-end technology is also more secure.
The EMV standard is already in place in the U.K. and Western Europe. MasterCard and Visa are pushing more aggressively for its adoption in the U.S.
After the 2015 deadline, banks and merchants will gradually face increased fraud liability on the old “swipe-and-sign” cards which carry a magnetic strip.
In full, our research shows that:
- EMV terminal penetration will grow fastest between 2013 and 2015, rising 43 percentage points from 14% at year-end 2013 to 57% over the course of 2015. Large merchants like Home Depot and Target will drive this growth as they make upgrades across all of their stores.
- Between 2015 and 2017, penetration will increase more slowly, growing from 57% to 87% — 30 percentage points. Growth in penetration will slow as the remaining smaller merchants — who have fewer resources and therefore are less likely to make frequent terminal upgrades — begin to adopt the standard.
- We also include datasets on the number of active terminals, and the projected market opportunity for EMV terminals. The number of non-EMV terminals will drop from 9.2 million in 2013 to 1.9 million by 2017.
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