As the debate continues over whether U.S. retailers are ready to embrace chip-enabled EMV smart cards to reduce payment fraud, industry players are moving ahead with developments designed to ease the transition to EMV in the U.S.
Retail industry executives are aware that EMV is the global standard for smart card chip-and-PIN-related transactions and they must become EMV-compliant by April 2013; after that time they will be liable for card-related fraud, if EMV chip technology could have prevented that fraud.
While fraud prevention alone may not deliver an acceptable ROI for EMV, the technology also will impact future integrations of mobile, contactless, card-not-present (CNP) and other payment strategies.
“There are much broader implications to embracing the market shift to EMV than complying by April 2013, or whether a merchant can absorb the costs of not complying,” Andy Brown, director of product marketing for ACI Worldwide, a global provider of payment systems, told Retail TouchPoints (RTP). “For example, EMV also serves as the basis for the contactless payment standard: Retailers that implement EMV will find their subsequent move to contactless much easier. They also will be well-placed to handle mobile’s various NFC wallet schemes, also based on EMV’s contactless capabilities. Though many retailers are not clear about which mobile scheme will win out, and so are hesitant about mobile as the driver for EMV implementation, the reality is that the underlying technology of EMV will be very similar for most all of the various mobile options.”
In addition, without EMV, retailers previously not targeted by fraudsters will be at risk “Once the majority of U.S. retailers are EMV compliant, and they will be,” stated Brown, “fraudsters will start picking off the easier targets: the ones who aren’t compliant.”
Citing another business case for EMV, Brown noted that once retailers have chip-and-PIN card readers in place, they can move to chip-based loyalty schemes with no extra cost at POS. EMV also improves the security of CNP transactions, such as Internet sales; chips can generate one-time passwords used by card issuers to better secure CNP environments. An online customer would insert the EMV credit or debit card into a handheld reader, enter her PIN, access the one-time password that validates the user’s identity, and then enter that password into the appropriate field on the online merchant’s checkout page.
“As cash continues to step from the retail equation, the EMV infrastructure will enable smooth adoption of many future capabilities designed to serve customers better and enhance the shopping experience,” Brown stated.
Current EMV Developments
A number of card providers have announced EMV initiatives in 2012. Most recently, on July 23, 2012, Bank of America announced it was rolling out chip credit cards to U.S. consumers who travel internationally, to improve the convenience and security of overseas transactions. In June 2012, American Express announced its U.S. EMV roadmap to advancing contact, contactless and mobile payments. MasterCard proposed in May 2012 the formation of a cross-industry U.S. EMV technology group designed to foster collaboration and alignment between networks, issuers, merchants, acquirers, processors, terminal and card manufacturers, and other groups. Discover revealed its EMV mandate for the U.S., Canada and Mexico in March 2012.
Additionally, in April 2012, the Smart Card Alliance announced new EMV certification training for the U.S. payments industry.
EMV has quickly become an important industry development. In the last half of July 2012 alone, RTP published several articles addressing developments in EMV and its implications. For more information, click on the following links: