A recent white paper issued by Dutch international digital security firm Gemalto N.V., a strategic partner of VeriFone Inc., gives a European perspective on the drive to introduce the Europay/MasterCard/Visa (EMV) chip technology to the United States. The free paper, titled The Migration to EMV Technology - EMV Implementation in the U.S., discusses the importance of Visa Inc.'s EMV push in the United States and looks at the consequences and costs of EMV implementation here for merchants and issuers.
VeriFone and Gemalto are working together on new chip-card solutions and technology for U.S. retailers and card networks.
The paper acknowledged Visa's effort to promote EMV. Visa said in 2011 it would bring its Technology Innovation Program (TIP) to the United States beginning in October 2012. Under the TIP program, eligible merchants will no longer have to validate Payment Card Industry (PCI) Data Security Standard (DSS) compliance in any year in which at least 75 percent of the merchant's Visa transactions originate from chip-enabled terminals.
To be eligible for this cost-saving TIP benefit, terminals must support both contact and contactless chip acceptance, including mobile near field communication technology. Merchants must also still comply with the PCI DSS.
"With this announcement from Visa, the United States payments landscape is no longer a future of magnetic stripe technology, but one of EMV chip technology and contactless and mobile payments," the paper stated.
Gemalto pointed to a number of merchant and acquirer benefits when the switch to EMV technology is made - not the least of which is fraud prevention. The encryption embedded in the EMV technology makes captured data worthless to criminals.
"When [card not present] fraud is included in the equation, the picture gets even more attractive for the merchants," the paper said, noting that fraud concerns are among the most compelling reasons for moving to EMV technology. "It is the consensus among observers ... that physical world fraud in the U.S. is already above the global average today and is on the rise. The lessons learned from the many migration activities worldwide clearly indicate that fraud migrates toward those regions which have not yet migrated to EMV technology."
The introduction of EMV will also make U.S. payments compatible with payments in the rest of the world, meaning when U.S. citizens travel they will be able to use their credit and debit cards virtually anywhere.
Gemalto endorsed Visa's request to issuers and merchants to move at the same pace as they begin EMV implementation. "The stakeholders are well advised to consider forced replacements of cards and devices outside of the normal replacement cycles," Gemalto said in the report. "The additional investment has a clearly identifiable return.
"It is even more important to initiate the migration of the ATM-installed base synchronously with the cards and devices. If ATMs are not made EMV compliant in sync with the POS devices, the life of the magnetic stripe technology will be prolonged, and ATMs become the single point of failure (or fraud for that matter) in the card payment system."
Gemalto believes contactless and mobile payments are the industry's future but it noted the "bulk of the hardware and software upgrades are still in front of the industry in order to make contactless and mobile payments a success. It would only take a small incremental investment to also provide EMV contact transaction capabilities in these new devices and thereby open up the U.S. acceptance infrastructure for the globally accepted EMV standard.
"Because of lower costs of terminals and cards, as well as Visa's TIP program, migrating to EMV will be easier and less costly than it was even a few years ago," Gemalto said.
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