Banks are increasingly worried about the likelihood that they'll look like the bad guys if merchants haven't upgraded their point-of-sale systems to support EMV chip cards, and then are hit by fraud and have to pay for the loss themselves, American Banker reported on Sunday (March 29).

"I don't want to see headlines saying, 'Big Bad Bank Put Mom's Pizza Shop Out Of Business,'" David Pollino, senior VP and enterprise fraud prevention officer at Bank of the West in San Francisco, told American Banker. "But it's coming if merchants don't take it seriously."

After Oct. 1, 2015, that bad publicity for card-issuing banks could become increasingly likely, and not just because retailers don't think it's a serious matter. After that date -- which is now just six months away -- any merchant that can't accept EMV chip cards will be liable for the costs of fraud unless the issuing bank hasn't upgraded the fraud-victim's card.

But many small merchants still don't know about that Oct. 1 liability shift -- more than one-third of all U.S. merchants weren't aware of it in a recent Aite Group survey. Others have calculated that their likely fraud costs are outweighed by the expense of upgrading their point-of-sale systems and paying extra to processors for EMV support.

"For small restaurants in particular, margins are so low that to do capital expenditures, especially on something that is not broken, is not something they want to do," National Restaurant Association general counsel David Matthews told American Banker.

And mom-and-pop retailers and eateries aren't the only ones resisting the move to EMV support -- so are members of the Merchant Advisory Group, which represents 85 of the largest U.S. retail chains. "With our folks there is a lot of uncertainty of its value, because of the availability of other types of technology that are better," said MAG VP Liz Garner.

She added that merchants are still waiting for testing specifications for certifying point-of-sale systems as EMV compliant. Those will have to come from the card networks, which have no excuse for being behind the curve on EMV adoption -- they're the ones that set the Oct. 1 deadline. "But even if the merchants had specs in hand right now, there's no way to get everybody on speed, certified and go live by October," Garner told American Banker.

Despite all that, 86 percent of large U.S. stores and 59 percent of all U.S. point-of-sale locations are expected to be able to handle EMV cards by the end of the year, according to Aite Group.

Another irritant for merchants: Along with foot-dragging on testing specs by card brands, card-issuing financial institutions will also miss the Oct. 1 deadline for almost half of their customers. While 70 percent of U.S. credit cards in circulation are expected to have EMV chips by the end of 2015 -- three months after the deadline -- debit cards will drag down the average, and only about half of all payment cards will support EMV by the deadline.