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In a roadblock for Apple Pay, only 1 in 5 US retailers are using their chip card readers

A new survey has found the vast majority of U.S. retailers with EMV chip-card-compatible credit card readers aren't using that functionality, presenting a major hurdle for acceptance of tap-to-pay services like Apple Pay.

EMV-capable credit card readers are now in use at about 5 million merchants in the U.S., following last October's soft deadline imposed by credit card companies. But only about 1 million of them have enabled the systems to start accepting chip-and-signature, according to MarketWatch.

Banks and credit card companies encouraged adoption of EMV readers by requiring merchants who haven't switched to cover the costs of fraudulent transactions. But hiccups with software compatibility have resulted in most hardware units not actually accepting EMV chips.

The bottleneck likely has an effect on adoption of Apple Pay, which can only be accepted at NFC-compatible payment terminals. While the EMV switch gave merchants an opportunity to upgrade to credit card readers that accept both NFC tap-to-pay and EMV chip cards, the lack of adoption of EMV means that other features of the new terminals, like NFC, are not enabled either.

Put simply, Apple Pay requires EMV compatibility to work. Therefore a terminal without EMV capabilities enabled cannot accept Apple Pay.

With traditional credit cards, the EMV standard depends upon a small embedded chip to authorize transactions, rather than reading data from the magnetic strip. Apple Pay, on the other hand, handles the EMV verification directly on an iPhone or Apple Watch.

Last month, Apple announced that Apple Pay was accepted at more than 2 million locations around the world— a milestone crossed before the service expanded into China. It's also available in the U.S., U.K., Canada, and Australia.