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Friday, May 6, 2011

Smart Card Alliance urges U.S. adoption of EMV

Payment processing technology is changing rapidly in Europe and around the world. However, industry experts believe the United States lags behind other countries in adopting state of the art card technology, and different standards and diverse technologies make selling in a global market problematic.

Credit card issuers who attended the Smart Card Annual Conference held in Chicago May 4 and 5, 2011, reported that the industry is encouraged by the first test of smart cards in the United States.

United Nations Federal Union, the first issuer of the Europay/MasterCard/Visa (EMV) cards in the United States, reported new account applications are up158 percent; new credit line requests are up 382 percent; existing line of credit increase requests are up 275 percent; revolving balances are down 20 percent; and purchases are up 18 percent since introduction of the new smart card.

Toni Merschen, who helped develop smart chips for MasterCard Worldwide and now has his own consulting firm, said smart cards work. "Not only does it work, contrary to everything else out there, EMV actually prevents fraud," Merschen said at the conference. "Everything else is after the fact." Merschen backed up his point with fraud statistics from countries where EMV is in use.

Merschen told the convention the European Payment Council supports the Single Euro Payments Area recommendation to get rid of magnetic stripes on cards. The EPC is recommending banks allow cards with chips only, no magnetic stripes. Further, the EPC is calling for banks to have the right to refuse magnetic card transactions. Finally, the EPC wants all Internet payments to be strongly authenticated using smart card technology by 2013.

Smart cards and fraud

All presenters at the conference talked about the increasing problem of card-not-present (CNP) fraud. The panel supported the use of smart-card technology to beat CNP fraud through strong authentication.

Consult Hyperion Director Dave Birch said he foresees a time when CNP fraud is so bad in the United States banks will begin issuing smart cards just for securing CNP transactions – even if there are no smart card terminals available. Merschen added that smart cards can also help solve the big problem of stolen credit card information. Stolen credit card information is worthless when smart cards are using dynamic data fraud prevention technology.

"If you cannot prevent credit card data from being stolen, you need to make it useless," Merschen said. "And it should be clear to everyone you can't prevent that data from being stolen."

Wal-Mart Stores Inc. revealed at the convention it now takes EMV cards in all of its U.S. stores. "We see 200 million customers a week, so if you're looking for a place in the U.S. to use your EMV chip and PIN card, come to Wal-Mart," Wal-Mart Senior Director of Payment Services Jaime Henry told the convention. "Let's get rid of the mag stripe and adopt the global standard."

Birch sees a big future smart cards. "Everyone knows the endgame is mobile," he said. "What you need is a plan to get there." He joined in Henry's call for global technology standards in the payment industry.

Federal Reserve Bank Executive Vice President Richard Oliver told conference attendees the federal government is working to facilitate an industry standard. He told the convention it is critical to bring smart-card technology to the United States. He said with mobile payments must come global standards, rules and good regulatory authority. end of article

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