ISOs, acquirers and processors are beginning to confront the challenges they face as the United States moves toward adoption of the Europay/MasterCard/Visa (EMV) standard mandated by the major card brands, Randy Vanderhoof, Director of the Smart Card Alliance and Acting Director of the EMV Migration Forum, said in an interview with The Green Sheet.
EMV is a global standard for integrated circuit (chip) cards. Considered to be more secure than mag stripe cards, EMV cards are already used in most regions of the world. EMV cards work with traditional terminals equipped to accommodate them; the cards can also be enabled with near field communication (NFC) for terminals that accept contactless payments. "EMV is not a technology change so much as a fundamental platform change to how payments processors accept transactions," Vanderhoof noted.
What the EMV migration means to the U.S. payments industry was the topic at the recent EMV Migration Forum's inaugural meeting at MasterCard Worldwide headquarters in Purchase, N.Y. The forum is an independent organization created by the SCA to assist in EMV implementation in the United States.
Vanderhoof said discussion among the 130 forum participants covered the impact of EMV on debit networks, clarification of EMV testing and certification standards, and EMV education and communication, among other topics.
"Issuers aren't being told they have to issue a specific type of card," Vanderhoof noted. He said among the decisions issuers face are whether to issue contact-only cards, contactless cards or both; and whether the chip will require a PIN, a signature or neither.
The decisions aren't easy. NFC-enabled cards are significantly more expensive to produce than more traditional cards. And when combined with chip and PIN, non-NFC cards achieve the main objective of EMV implementation: to significantly reduce the use of counterfeit cards at the POS.
Issuers also are working on processes for assigning a PIN when a card is issued and for when the password is reset. Credit providers are additionally trying to resolve how to capture a sale when a legitimate customer doesn't have or remember the PIN.
Vanderhoof said the U.S. payments industry is unique because there are so many processors and acquirers here. No single supplier has the market power to make one solution prevail. Merchants and acquirers are instead faced with multiple POS options, along with multiple tests and certifications.
"Processors and acquirers don't have to be able to process EMV transactions by the deadline; they only need to have their application tested and approved by the deadline," Vanderhoof pointed out. "But each card brand has its own application certification and testing procedure in place."
Getting ATMs ready for EMV is another challenge for the industry. "ATMs vary in their software and hardware," Vanderhoof said. "They are not like the POS; you don't just unplug them and swap them out.
"The upgrades needed, and the complexity of preparing ATMs to accept EMV cards, are only just beginning to be evaluated. From a fraud standpoint, as merchant terminals are hardened by EMV, fraudsters will move to the least secure point, and in some cases that will be the ATM."
Regarding mobile payments and EMV, Vanderhoof said, "Merchants will have to make complicated choices in terms of accepting mobile payments, and this could delay adoption of EMV. But the reality is merchants are not in a position to refuse any method of payment a consumer wants to use.
"Though it may be in the merchant's best interest to ride an alternative payment rail, it doesn't take away from the fact that most consumers come in with their bankcard from their financial institution, and that will be the way they will choose to make their payment rather than with a mobile app."
Also, after 2015, the cost merchants who are not EMV-compliant will bear for card fraud associated with them will be far greater than their current processing costs and Payment Card Industry Data Security Standard compliance fees, and that's another incentive for adoption, Vanderhoof said.
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