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EMV: The Moving Target

Arroweye

EMV has been implemented around the globe, but the US is lagging behind. Fear of high costs, uncertainty about chip specifications and cardholder verification methods, and intimidating regulatory requirements have all meant that many organizations have been slow to take on the challenge of implementing EMV, even though new regulations say they must, and the National Retail Federation says it is the only secure standard. The cost of the transition to EMV is estimated to be $8 billion, and that number, while staggering, is causing some retailers to stop dead in their tracks when it comes to implementation.

The reality is this: major retailers are installing EMV-enabled point of sale equipment now, and in less than two years, 95% of all cards in the US are expected to be EMV-capable. If you are a retailer that offers branded credit or debit cards, you must take action, but you don’t have to take an all or nothing approach. The solution is a timely, four-step approach that will allow you to get an EMV card into the market without getting locked in to one production strategy or breaking the bank.

Step 1: Segment and prioritize your card market.

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You don’t have to transition your entire customer base to EMV at the same time. Instead, take the time to look at who might really benefit from EMV first. Perhaps they are high value customers who request EMV, or the customers with the highest average spend. Take the time to segment and prioritize your customer base, focusing on those tier-one customers who will truly benefit from EMV first.

Step 2: Identify initial technology preferences

Because there are so many different EMV implementation options, no one wants to bet their entire card inventory on a particular chip type or verification method. Each card program could have drastically different needs, and many players in the payments ecosystem have yet to confirm their ability or intent to handle certain types of authentication or verification.

In addition, industry experts expect cards to evolve over time. Most early cards will be a ‘hybrid’ with both a chip and a traditional magnetic stripe so that account holders can still complete transactions as they come across various types of point-of-sale equipment at retailers and banks. Cards will eventually lose the mag stripe and offer a “dual interface” with a chip and a contactless method.

But without flexibility built into their plan, many retailers are playing the “wait-and-see” game, incorrectly assuming that they’ll reduce their risk by watching and then responding to market trends or legislation. This late-to-market approach will create a rush of large-volume orders, resulting in bottlenecks for conventional production manufacturers — bad news for card programs, customers and for the industry as a whole.

But with all problems come great opportunities for those who are ready. The EMV Migration Forum recently confirmed that terminal manufacturers are anticipating that issuers will use a mix of cardholder verification methods (CVMs), and as a result, in-store hardware and software will be ready to accept payments with all CVMs. This means that issuers and program managers have a great opportunity to both be flexible and timely, by selecting and testing various technology implementations today, and identifying which solution best meets their customers’ needs as they go — even if that means different solutions for different market segments.  

Step 3: Outline initial go-to-market strategy

Even as market standards for verification methods are sorted out, different types of card programs will still likely require different chip types and verification methods. Chip-only verification, for example, can work well for low value, high frequency transactions, like those that would be common with a mass transit card. While it uses chip technology instead of a magnetic stripe, chip and signature verification works in a manner similar to traditional credit and cards and might still be relevant with some markets. The global standard — chip and PIN technology — is more secure, and is favored by many major retailers as well as MasterCard. Chip and PIN is also ideal for travel card and international transactions.

Regardless of your program type, now is the time to start with pilot programs and avoid the rush and cost of a delayed large-scale implementation. No program should have to commit to a long-term solution that lacks flexibility.

Step 4: Engage a just-in-time production solution

Having a giant backlog of cards sitting in a warehouse only to go stale is every issuing manager’s biggest fear, and is one of the reasons why many have been so slow to implement EMV. Sitting on inventory, especially for a more expensive EMV product, can tear directly into your bottom line. Using a just-in-time production solution allows you to create only the cards you need, exactly when you need them. That way, you’ll have the agility to test pilot new programs with the peace of mind that you can reevaluate as you determine the best approach to your long-term EMV needs. 

With recent security breaches in the news, the transition to EMV is looming in the forefront of your customer’s minds. But making the change doesn’t have to cause massive upheaval to your organization’s bottom line. Try taking a slow, methodical approach, and you’ll find that it might just be easier than you think. 

 

Render Dahiya became CEO of Arroweye Solutions in 2007. Shortly after coming on board and earning his stripes in the closed-loop sphere, in 2009, Render set his sights on expanding Arroweye into the open-loop space. Under his leadership, Arroweye became the first company ever to receive Visa certification to manufacture and print the Visa logo on-demand while simultaneously personalizing a payment card. This certification launched Arroweye into significant market growth. Most recently, Arroweye logged its most successful year to date in 2012 and helped power an award-winning, first-of-its-kind ID and payment card solution for the underbanked.

 

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