WASHINGTON – Reducing credit and debit card fraud by implementing EMV chip card acceptance has become retailers’ top payment issue in 2016. But retailers are also busy with new data security enhancements, such as point-to-point encryption and tokenization, to better protect payment card data. That’s according to a new study released by the National Retail Federation and Forrester that surveys CIOs and technology executives at 59 large and mid-sized retail companies and is the first partnership between the two groups that focuses on retail industry payment issues.

The State of Retail Payments 2016 study, subtitled “Securing Consumer Payment Data Continues to Dominate the Payments Agenda,” also found that EMV adoption has been hampered by bottlenecks throughout the U.S. payment system and that the emphasis on security has pushed aside other priorities such as mobile payment.

“EMV is important, but chip cards alone won’t do the job of making data secure, especially if they’re only chip-and-signature rather than more-secure chip-and-PIN,” NRF Vice President for Retail Technology Tom Litchford said. “That’s why retailers are working hard on technology like point-to-point encryption and tokenization that will ultimately do more to achieve the goal of putting hackers out of business. And the sooner security issues can be resolved, the sooner retailers can bring new innovations to the way shoppers pay for their purchases like mobile and digital wallets.”

When asked to name their top three payment challenges of the past year, 76% of retailers surveyed cited EMV as the top contender and 46% cited chargeback issues often related to EMV, while 37% pointed to implementation of security efforts like encryption and tokenization. In response to these challenges, 86% of retailers surveyed have implemented or expect to implement EMV by the end of 2016.

The study said that “many retailers are working feverishly” to complete the EMV transition but “payment vendors have not been able to keep pace” with certifying EMV equipment installed by retailers. With some retailers yet to install EMV equipment and many EMV installations that have been done awaiting certification, the study found retailers have been challenged with a higher-than-usual number of chargebacks; one company said chargebacks are so high they have “affected our bottom line.” Under liability changes imposed by the card industry in October 2015, merchants are now required to absorb fraud costs through chargebacks when a card is counterfeit and the retailer does not have a certified chip card reader in operation. Previously, for in-store transactions, counterfeit card fraud was usually absorbed by the bank that issued the card.

Since EMV is intended to ensure that the card is not counterfeit but does not directly protect card data itself, retailers are working on other steps that protect card data when it is being transmitted between the retailer and card processor or stored in retailers’ computer systems. The study found 93% of retailers surveyed expect to have point-to-point encryption in place by the end of 2017 and that 61% expect the same for multichannel tokenization. (Read more on tokenization in NACS Magazine.)

“Retailers will have made significant progress and investments securing and reducing fraud by the end of 2016,” said Brendan Miller, principal analyst at Forrester. “With that foundation, they can now adjust much of their focus to optimizing the customer experience by adding new payment methods and improving checkout flows to meet their customers’ changing needs.”

With attention focused on security, retailers are taking a measured approach to new forms of payment such as mobile and digital wallets, with only 17% citing it as one of their top issues for the year. Near-field communication (NFC) used by many mobile payment systems is built into most EMV terminals, so 72% expect to be equipped for NFC by the end of 2017. But 68% plan to accept only one “or a very few” types of digital wallets, rather the half-dozen vying for acceptance.

Of the major players in mobile and emerging payments, 76% of retailers plan to accept Apple Pay by the end of 2017, compared with 59% for PayPal. Others face an uphill battle, with 53% saying they have no interest in Venmo, 43% not interested in Alipay and 38% with no interest in Pay With Amazon.