By Bill Pirtle
C3ET Credit Card Consortia for Education & Training Inc.
When writing "EMV, are we there yet?" (published in The Green Sheet, Dec. 12, 2011, issue 11:12:01), I sought input from terminal manufacturers regarding Visa Inc.'s August 2011 press release, which revealed the company's intention to accelerate Europay/MasterCard/Visa (EMV) chip migration and adoption of mobile payments.
I placed a request on VeriFone Inc.'s LinkedIn group, "VeriFone North America MLS & ISO." Tobi North, a senior marketing professional with VeriFone, contacted me and arranged for a conference call with two gentlemen who could answer my questions on EMV:
Erik Vlugt, Vice President of Product Marketing and Integrated Systems at VeriFone, and Scott Henry, the company's Director for Product Marketing.
We began by discussing whether now is a good time for agents to be selling EMV-capable equipment. Vlugt, who is knowledgeable about retail and petroleum systems, clarified that April 1, 2013, is "only the date that Visa set for all acquirers and processors to have the capability to support EMV for processing card information.
"Oct. 1, 2015, is the point where liability shifts to merchants for contact chip cards not processed through EMV or NFC [near field communication] terminals for nonpetroleum merchants. Since petroleum terminals are more complex, the deadline on those is Oct. 1, 2017."
I asked if there were incentives for ISOs to sell, or for merchants to buy, EMV-capable terminals. Vlugt discussed Visa's Technology Innovation Program (TIP), which eliminates the requirement for eligible merchants to annually validate their compliance with the Payment Card Industry (PCI) Data Security Standard (DSS) for any year in which at least 75 percent of the merchant's Visa transactions originate from chip-enabled terminals.
Linda Grimm wrote in "Visa to eliminate PCI DSS requirements with EMV - not," The Green Sheet, Nov. 14, 2011, issue 11:11:01, that mostly only Level 1 merchants need to validate compliance. Level 3 and 4 merchants (the ones making up the majority of merchant level salesperson [MLS] portfolios) will not be affected by TIP.
Henry said there would be packages available to the ISO channels to spur sales in PayMedia, contactless and NFC terminals. (PayMedia is a VeriFone solution that integrates new media and payments. It supports traditional and emerging payments, as well as related services - such as electronic couponing - in nontraditional environments.)
I asked if there was currently a network in the United States for smart cards. Vlugt said the network was due to be fully in place by 2013 and that Wal-Mart Stores Inc. was expected to be capable to run EMV transactions in 2012. He noted that processors active in Canada already have the capability to process EMV, as those cards are in use there.
Henry stated that the transaction sets depend upon the processor. I understood this to mean that the terminals being sold now can transmit transactions for chip-enabled cards, but it depends upon the front- and back-end capabilities of the processor on whether transactions can be processed that way.
EMV-capable terminals are becoming more common. Although percentages are not available to confirm, the largest retailers are implementing the terminals at a faster rate than others. But the percentage of EMV-capable terminals for Tiers 3 and 4 is also increasing. As mentioned earlier in this article, petroleum conversion is not coming along as quickly because of the complexity of those transactions.
GS Online MLS Forum members had questions about standards, and some thought differing standards would slow down EMV implementation. As I stated in my last article, why should the standard in the United States differ from the standards in Europe, Canada or South America? U.S. banks are issuing cards that will work in Europe and elsewhere.
Developing different standards in the United States would affect the usability of European cards in the United States. With the card brands creating the standards, I would expect the standards to be the same across the world to allow any EMV chip card to be used anywhere.
I asked the experts for their opinions. Vlugt said EMV standards have changed and will continue to change. The current standard is version 4.2. Henry added that there are two levels for EMV- capable terminals. Level one is hardware based. Does the terminal have the slot and the chip reader? If not, then you would need to replace it. Level two is software based.
Major changes can be accomplished via manual download, but Henry said most updates are done automatically. This brought to mind calling tech support with a new American Express Co. merchant account: there is no need to download new instructions; the terminal is just updated remotely at the next batch. Apparently, simple tweaks also can be done remotely.
Vlugt said VeriFone welcomes Visa's smart card/EMV initiative and, because Visa set up a clear and manageable timetable for implementation, he believes there will be no delays. He also feels that utilization of smart card/EMV technology is not only critical to reduce ever-increasing fraud in the United States, but that it will also add interoperability among global markets.
Vlugt gave the example of the American in Germany finding out that his U.S.- issued credit card is not being accepted at a gas station.
My last article mentioned that top banks were starting to issue EMV cards to "affluent clients who often travel abroad." But what about someone on his or her first trip overseas who is not affluent and has no clue that a card universally accepted in the United States will not work in some readers overseas?
Is EMV perfect? No, it will not help curtail online fraud. But it can eliminate the type of fraud where fake credit cards are easily produced or magnetic stripes are reprogrammed and used thousands of miles away from where the card was skimmed.
Henry believes now is the time to start educating merchants on EMV. That means, as you add new merchants, start selling them on EMV-capable terminals now because, if you sell your merchant on a non-EMV terminal now, are you prepared to go back and tell them later that they need to switch? Vlugt said if you just installed a new non-EMV terminal, you can wait to replace it until 2015 (before the Oct. 1 deadline).
It would seem that EMV is really coming this time. If your ISO or terminal supplier does not indicate which terminals are EMV capable, look on the manufacturer's website. I would like to thank Tobi North for bringing my request to the attention of VeriFone executives, and to thank Erik Vlugt and Scott Henry for taking time from their busy schedules to discuss Visa's EMV initiative.
What you do today, determines your tomorrow.
Bill Pirtle is the President of C3ET Credit Card Consortia for Education & Training Inc., a joint venture with Theodore Svoronos of Merchant University. Created to establish a comprehensive training program for ISOs and merchant level salespeople, C3ET is working with industry experts to produce a training guide to be published in early 2012. Bill's email address is email@example.com. He welcomes all connections on Facebook and LinkedIn.
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