EMV Credit Card Increase Security But Slow Implementation Will Make Consumers Vulnerable

New smart chip technology or EMV in credit and debit cards can help reducing fraud. However, incomplete adoption of chip cards and readers will make both consumers and merchants vulnerable to fraud, experts said.

Although chip-enabled credit card and debit cards are the latest technology to protect consumers, but it can not eliminate fraud risk. Especially, since most card readers still required consumers to swipe their cards instead of inserting the smart chips.

Vice president of risk products at Visa Stephanie Ericksen acknowledged the slow adoption in United States. As of last year, there are only about 766,000 or less than 20% of merchant locations in the U.S. had adopted the more secured new credit card readers.

The card new readers read a unique code from smart chip embedded in the credit cards for each transaction. The system enhances security by making it more difficult for criminal to make a counterfeit credit card.

"It's not data that they can use to create counterfeit cards, because they can't replicate that dynamic code that's different in each transaction," Ericksen told Fast Company.

Chip-enabled card, or known as EMV cards in Europay, MasterCard and Visa are acclaimed to provide more safety and improved security over traditional cards. U.S. retailers, credit card companies and merchants were supposed to adopt the new technology by October last year. All card-accepting merchant that missed the deadline are to be held liable for fraudulent transaction.

Another research from The Strawhecker Group (TSG) showed that in the fall of 2015, only 37%, or less that half of American business adopted the credit card chip technology. TSG surveyed more than 3.9 million merchants in 92 payment service providers, representing 50% of U.S. business accepting credit card.

In the September's survey, TSG found only 27% of merchants supported the EMV cards. Although TSG expect a 44% increase in December, but the latest result showed lower number. TSG found three hurdles that delay implementation, they are payment processor readiness, gateway readiness and technical staff resource availability

"It appeared that some merchants delayed EMV migration completely until the holiday season ended to prevent friction and confusion at the checkout line," Jared Drieling, business intelligence manager at TSG told CNBC.

One prominent case is the security issue in San Diego Metropolitan Transit System (MTS). KPBS reported that although it has used a smart chip, but San Diego MTS admitted that its Compass Card collection system does not comply with Payment Card Industry Data Security Standards, (PCI DSS). MTS has hired AppliedTrust, a data security firm to strengthen its data protection and comply with the security standard.

EMV is a technology to protect consumers and merchants from fraud. However, incomplete adoption of cards and its readers will keep both both consumers and merchants vulnerable.