In a TowerGroup webinar that dealt with the state of the Payment Card Industry Data Security Standard, the question of whether chip and PIN technology will ever supplant magnetic stripe technology in the United States was addressed. Brian Riley, Senior Research Director, Bank Cards, at TowerGroup, concluded the move may be cost prohibitive and ineffective given the changing payments landscape.
In Putting the "You" into PCI: 2010 Card Industry Update, Riley said chip and PIN, which underpins the Europay/MasterCard/Visa (EMV) security standard, is often mentioned as a possible replacement for the mag stripe technology that prevails in the United States. Riley acknowledged that, in comparison to the mag stripe, chip and PIN delivers stronger security to payment cards, which makes the technology a greater deterrent to fraud.
"Another strength is that it's got an ISO standard, an international standard ... and that's certainly a deterrent for many fraud types," Riley said. "However, it does have its weaknesses. At the end of the day, EMV chips are a 25 year-old standard. And in the computer generation, that's a lifetime, or several lifetimes."
Riley also noted that the EMV solution is more costly to produce than mag stripe cards. Additionally, if fraud costs the United States an estimated $6 billion annually and the replacement of the mag stripe with chip and PIN costs close to $5 billion, the conversion would not make sense financially, he said. Furthermore, the POS terminal infrastructure in the United States would have to undergo an expensive upgrade to accept chip and PIN cards, Riley pointed out. Also at issue is the compatibility of chip and PIN with the U.S. contactless card initiative.
"When you start looking at contactless cards, you start having very complicated plastic in the customer's hand," Riley said. "These will require multiple chips. ... One issue that we looked at when we looked at EMV cards versus mag stripe is the fact that the interoperability between EMV countries and non-EMV countries will be a challenge."
Another factor to consider is how EMV cards fit into a marketplace evolving toward online and mobile payments. Riley said chip and PIN "doesn't work particularly well in the online environment. And the online environment today is the fastest growing channel." The virtual ecosystem for contactless mobile payments, which reduces the need for plastic cards, also seems to weigh against the adoption of EMV card technology in the United States. Riley said a digital payment environment calls for digital security solutions, such as dynamic account numbers and one-time pass codes.
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