The Wall Street Journal
Chip Card Nightmares? Help Is on the Way
Chip cards, also known as EMV cards, are getting faster at the register, but mobile payments like Apple Pay are the real answer
Here’s what it’s like to buy something at a store these days:
- Swipe card.
- Get scolded by cashier to use the chip reader.
- Insert chip and cancel all foreseeable plans.
- Wait some more.
- Celebrate once you hear that joyless “Remove card” sound.
Next time you experience this, I want you to remember that it’s not you. It’s the banks, credit card companies, merchants, payment processors, terminal manufacturers and many others that have created this checkout catastrophe. But there’s a ray of hope: your smartphone.
After pulling out the stopwatch for over 50 transactions at various retailers in recent days, I can confirm that it takes twice as long to pay with a chip card than with a card swipe or mobile payment—on average, 13 seconds versus 6 seconds.
Think about it this way: If you made two purchases every day for a year with a chip card instead of a swipe or smartphone, you’d spend 85 extra minutes at the checkout counter. That’s nearly an hour and a half of your time, to give someone your money.
And that doesn’t count the time playing swipe-or-chip roulette. Consider yourself lucky when you encounter a “NO CHIP!” sign or a duct-tape blockade over the slot.
It is completely understandable to think the U.S. transition to more secure chip-based credit cards—years after the rest of the world—is the worst thing to ever happen to our payment system. Except I now believe it’s the best thing.
Yes, there are serious security benefits to chip cards, and the transactions will get drastically faster, from what I have seen. But the real payoff? The technology that supports chip cards is also laying the groundwork for the death of all plastic cards. Smartphones will replace our wallets once and for all.
Chips vs. Swipes
Paying with the magnetic strip on your card has been as secure as locking your front door with a piece of masking tape.
A swipe of the strip sends unchanging data to financial institutions to confirm your card account number, expiration date and other information. If criminals access that sensitive data, they can use it to make a counterfeit card and fraudulent purchases again and again and again—until the card is canceled.
Things are more secure with chip cards, aka EMV cards, named after the companies that originally developed the technology: Europay, MasterCard and Visa. Once inserted in the slot, the small, metallic square chip offers up a unique string of numbers—or a cryptogram—that goes to the financial institutions to verify account info. Since it’s different for each transaction, a criminal couldn’t steal it to use again.
So why the hubbub? For all that to happen, stores need to purchase high-tech terminals which must be upgraded with software, then certified by various parties, including all the accepted payment brands (Visa, MasterCard, American Express, etc.). Not only is this process costly, but for larger chains with complicated systems, it can take up to six months.
Then there’s the transaction itself: Since it generates more data than just a swipe, it takes (a lot) longer.
Only 28% of the total merchant population in the U.S. supports the payments, according to Visa. As of last October, any retailer that doesn’t take chip cards is responsible for paying back counterfeit transactions once paid by banks.
This “liability shift” stirred some to action. Megaretailers such as Target, Home Depot and Wal-Mart jumped on board, but Starbucks, Dunkin’ Donuts, Subway and others are slow to put an end to swiping. (At my local Starbucks, I can get my latte by paying with a chip at one terminal, or swiping at another. Mobile payments are accepted at all of them.)
“Many don’t yet take EMV because the longer lines tend to be a much greater hit than the fraud that they’d have to pay for,” says Joseph Koenig, a technology manager at Index, a company that implements software in point-of-sale terminals.
Hardware makers and credit-card companies are owning up to their role in this card-pocalypse, and are working to speed up check-out times. With new, quicker chip options, instead of leaving the card in the terminal during the entire transaction, you can pull it out after two seconds and put it away.
This week, New Leaf Community Markets, a small Bay Area grocery chain based in Santa Cruz, Calif., is expected to be first in the country to update its registers with the faster system. In a live video demo, it worked as promised. Just a few seconds until you see that glorious “Please Remove Your Card” prompt.
It would be great if the fix hit every store, instantly. However, just like the original installation, it’s a process involving multiple steps and parties. Visa and MasterCard, which have been leading the charge, expect it to roll out to more retailers by the end of the year.
Meanwhile, terminal makers such as Ingenico and VeriFone have started updating their software to process regular chip payments faster, too.
Chips vs. Smartphones
Still, given the choice to use the fastest chip option or pay with my smartphone, I’ll pick smartphone every time.
Apple Pay, Samsung Pay and Android Pay were all twice as fast as current chip cards in my testing. Hold up your phone, press on the fingerprint sensor to confirm it’s you and six to seven seconds later, you’ll hear that pleasing ding that you’re done. In some cases, I even hit four seconds. Paying with a debit card was slower, since you still have to input your PIN.
These services can be faster because they use the same EMV process as chip cards, but with fewer steps. They’re also more secure, because they require a second form of authentication—a fingerprint or PIN—to confirm you are you. In other countries, chip cards require a PIN, too. U.S. banks opted against it for credit cards since they feared an even tougher transition for merchants and card holders. (You still often have to provide your John Hancock.)
Paying with store-specific apps that use QR codes, like the ones from Starbucks, Chick-fil-A and Subway, is just as speedy. It can earn you points and coupons, too. However, if the future is having 50 different store apps on my phone, count me out. That’s where Apple Pay and Android Pay’s integration of loyalty cards comes in. Stores such as Walgreens make the whole process incredibly easy—you pay and log your Balance Rewards points at the same time.
I’d love to use my phone to pay, you’re thinking, but I never know where mobile payments are accepted. Samsung Pay’s MST technology solved much of that because it can work with those old, ubiquitous magnetic strips. Apple Pay and Android Pay, which rely solely on near-field communication (NFC) technology, are accepted at millions of stores—and counting. Many have the logo on the terminal to indicate it is accepted. (Apple, Google and Samsung confirm that they don’t collect any information about your shopping habits.)
The good news? EMV-supported terminals are the kick in the pants that merchants needed to start adopting smartphone payments.
“The huge benefit of upgrading to the new EMV terminals is that there is now the hardware in place to support mobile payments,” says Randy Vanderhoof, director of the U.S. Payments Forum, which has led the transition to EMV.
The bad news? “Many merchants have had to get through chip-card EMV certification first, and that has taken priority over mobile implementation.”
Yes, the long wait for real progress continues. But you’re not as helpless as you feel. While the industry continues to shuffle its deck of plastic cards, we’re going to push the mobile payment revolution ahead.
So do your part: Next time you see that chip-card terminal, ask, “Can I pay with my phone?”
Write to Joanna Stern at Joanna.Stern@wsj.com or on Twitter @JoannaStern