Tuesday, July 7, 2015
As the Oct. 1, 2015, liability shift deadline draws near, U.S. payments industry stakeholders are pulling all the stops to drive mass adoption of Europay, MasterCard and Visa (EMV) payment methods in the merchant community. Despite broad chip card issuance and overall merchant receptivity, recent studies by Forrester Research Inc. and The Strawhecker Group conclude that upgrading the U.S. POS infrastructure to more secure, intelligent EMV technologies may take another four to five years of collaborative effort.
Forrester's April 2015 revealed that emerging payments schemes ‒ for example, digital wallets and mobile payments that use near-field communications (NFC) ‒ are expected to complicate the EMV rollout and take market share from plastic EMV signature and chip-and-PIN cards in the United States. "Forrester predicts that plastic EMV won't achieve broad adoption in the U.S. until 2020," the report stated.
The Strawhecker Group survey results, released in March 2015, indicate that only 34 percent of U.S. merchants are expected to have EMV systems in place by the October deadline. The report analyzed responses from 33 merchant acquirers and identified three major obstacles to EMV adoption: software application readiness, gateway readiness and processor readiness.
EMVCo, a global technical body consisting of six card brand members, American Express Co., Discover Financial Services, JCB International Credit Card Co. Ltd., MasterCard Worldwide, UnionPay and Visa Inc., reported a 1 billion unit increase in worldwide circulation of EMV cards in the final quarter of 2014. Other statistics published May 6 include:
EMVCo Executive Committee Chair Tac Watanabe is encouraged by the uptick in cumulative transaction volumes and healthy pace of global EMV adoption. He noted that EMVCo's end goal is to "enable globally interoperable chip payments, so their growth in adoption is fundamental to the development of a more secure international payments industry."
While the United States will be the last region in the world to broadly implement chip-embedded EMV technologies, its payments ecosystem is considerably more complex than other developed economies. The Princeton, N.J.-based Smart Card Alliance estimates the U.S. payments infrastructure represents approximately 1.2 billion credit and debit cards and 12 million POS terminals.
Sean Conroy, Chair of EMVCo's Board of Managers, noted a significant acceleration of card issuance in the United States. "We are aware that the US merchant and acquiring communities are actively enabling their acceptance environments and platforms to support EMV transactions and anticipate further advances will be made in this market throughout 2015," he stated.
The Payments Security Task Force, established in 2014 to promote security best practices, reported on May 4 that eight major financial institutions representing 50 percent of total U.S. payment card volume expect 63 percent of credit and debit cards issued to contain chips by the end of 2015, progressing to 98 percent in 2017. An additional survey of U.S. acquirers found that approximately 47 percent of U.S. merchant terminals will be chip-enabled by the end of 2015.
Among the benefits of late adoption is the availability of use cases from developed economies that have successfully integrated chip card technologies into legacy payment infrastructures. John Mulligan, Executive Vice President and Chief Financial Officer at Minneapolis, Minn.-based Target Corp., noted that implementing EMV significantly decreased payment card fraud in both the United Kingdom and Canada.
Target introduced chip card technology in the United States more than a decade ago but concluded that the program was too far ahead of its time. "[The] technology at that time would have only been usable in our stores, making for a confusing experience for customers, overall," he stated. "After three years of going it alone, we discontinued the program."
Mulligan said that in the aftermath of the epic December 2013 data security breach that affected millions of Target customers, he resolved to learn from the incident and "work to make Target and the wider business community more secure in the future." Target invested 100 million to upgrade its processing systems and reintroduce its store-branded chip cards in 2015. Mulligan stated that embedded microprocessors in the new "REDcards" combined with a four-digit PIN that consumers use to complete in-store transactions will further protect cardholder data.
While it may not be a silver bullet, EMV technology's multifactor authentication offers a proven defense against counterfeit payment card fraud. Patty Walters, Senior Vice President of EMV Corporate Strategy at Vantiv Inc. has led the EMV rollout in the United States in the merchant and financial institution segments. She also serves on EMVCo's Board of Directors and the Smart Card Alliance's EMV Forum Steering Committee.
"Counterfeit payment card fraud has been growing at 25 percent year over year in the U.S.," Walters said. "We can't allow this trend to continue. Point-to-point encryption, tokenization, and EMV are essential for creating a multi-layered approach to security."
John Carro is President of Tri-State Merchant Services, a Vantiv ISO headquartered in Hauppauge, N.Y. Carro and his team have been upgrading their merchants to EMV processing systems. They routinely participate in Vantiv's webinars and training programs.
"There are bound to be little glitches in any wide-scale rollout," Carro said. "For example, we recently heard from several merchants who reported an error message that appeared when they used certain EMV debit cards." Carro immediately notified Vantiv to request a review.
Walters recommends promptly directing such matters to merchant help desk and customer service teams. Issues that cannot be resolved internally can be escalated to payment acquirer and card issuer networks. "Call your acquirer and provide as much information as possible; ask the cardholder to contact the issuing bank," Walters said. "If the issuer can't see a transaction, they can notify the payment network to request a case log and further research."
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