VeriFone and EMV: Part II
The following article is the second in a two part series and is reprinted with the permission of Aberdeen Group, Inc. For further information visit www.aberdeen.com or verifone.hp.com.
VeriFone’s EMV Strategy
VeriFone manufactures POS terminals that are used around the world for acceptance of card-based payments. Since smart cards have arrived on the payment scene, VeriFone has taken the lead to comply with specifications developed by Europay MasterCard Visa (EMV). VeriFone’s EMV compliance strategy includes:
1) Certifying terminals;
2) Creating reusable application software and libraries on a new, multi-application platform; and
3) Providing an upgrade solution to the existing install base.
VeriFone also develops and releases pre-certified terminals and off-the-shelf applications. This benefits banks and software providers who can leverage VeriFone’s development efforts and focus their own efforts on creating host interfaces. This, in turn, eliminates the time and cost of developing and submitting their own custom applications for EMV approval, thus shortening their time to market.
Application Environments
To better respond to EMV specifications for smart card usage, VeriFone has changed its existing single application platform to a multi-application operating environment. Until now, VeriFone and most of its competitors have delivered a single application environment. Single application provided multiple functions, and there was no true application separation. Change is one of the few constants in a high tech world, and EMV specifications are bound to change in response to ongoing changes in technologies and market needs. In a single application environment, this change will have an impact on re-certification time and costs, as well as time-to-market. This is because software code would need to be changed throughout the application and the company has to go through both development and testing phases.
In a multi-application architecture, the applications are independent of each other and, although they may be linked by processing logic, there is true application separation. Thus, for any change in EMV specifications, only the application that has been affected would need to be re-certified, as the change would not have an impact on all other applications.
VeriFone’s creation of a true multi-application operating environment will shorten the time and reduce the costs of re-certification. Shorter certification times should benefit merchants and card issuers because faster availability of new applications means merchants and card issuers can continue to create new value-added services—adding revenue to their existing streams. With this architecture, different acquirers, banks, and countries can use the same applications through the addition of a host layer that is different from one acquirer, country or bank to another. The multi-application environment also lets the acquirers or banks add their own applications.
VeriFone Multi-Application Environment
The fo1lowing elements make up VeriFone’s multi-application architecture:
• Verix Operating Platform: This operating system provides a scalable architecture that implements true application separation at the hardware and software levels. It also has a built-in file authentication feature that allows secure downloading of new applications as well as upgrades without re-certification of the existing applications. Verix has the intelligence to allocate a precise amount of memory to each application, thus maximizing the number of applications that can reside on one terminal.
• SoftPay Application: This is the payment engine in the Verix operating platform. SoftPay selects options for merchant-specific differentiation in various markets, e.g., healthcare, government, retail, financial services, and hospitality. It supports country-specific host modules and performs business-critical reporting. SoftPay includes EMV pre-certified, pre-tested modules that can be shared or reused in multiple markets.
• VeriShield Security Architecture: In addition to meeting security specifications required by EMV VeriFone has its own layer of end-to-end security built into the terminals. The security feature combines physical and logical measures to protect against possible fraud. VeriFone also has a file authentication feature that prevents unauthorized applications from being accessed on a terminal, thus reducing the risk of intrusion. Downloading of application or operating system upgrades is modular and does not interfere with existing applications, thus enabling applications from different parties to run without interference.
• Verix Development Kit: This software developer’s kit allows acquirers and third-party developers to create new applications that are compatible with VeriFone application architecture in order that they may run seamlessly on VeriFone terminals. All of these applications are collected in an application library, which then allows VeriFone or any acquirers to access the required applications and replicate or modify, as need be, for use at any other terminal.
• VeriCentre: This NT-based suite of software modules constitutes an appliance management system that comes into play when there are multiple terminals in one location. With features like compression for fast downloads, a remote diagnostics and control module, and help desk support, VeriCentre improves the productivity of deployment and repair organizations, and help desks.
VeriFone’s EMV-Compliant Terminals
The VeriFone Omni 3350 is a multi-application-based, EMV-compliant terminal that has receive type approval. It contains a 32-bit processor with a 14.4K modem, 3MB of memory, and a 12.5 lines-per-second (lps) printer. The 3350 is based on the Verix application platform and features application separation, file authentication, and the Softpay e-Payment application, including an EMV software module.
Alternatively, the existing install base can be upgraded using a variety of VeriFone’s EMV-approved peripherals. VeriFone customers can purchase an upgrade package to meet EMV specifications without having to make a significant investment in replacing existing terminals.
VeriFone and EMV Certification
VeriFone is among those first to market EMV-compliant terminals and applications. The new VeriFone terminals—and the new software environment that runs on them—are likely to stimulate the acceptance and adoption of smart card technology for a number of reasons, including the following:
• Only the host layer for a given country or financial organization needs to be developed and certified by the acquirer, rather than the complete program.
• The applications that are being created are consolidated in a library. This will help VeriFone replicate only the applications necessary to customize the host layer for a specific country or bank.
• With the changes in EMV specifications, VeriFone will need to make changes to the applications and certify them only once because the same application set runs on all terminals globally with different host layers.
Conclusion of Aberdeen Group
VeriFone is one of the leading suppliers that market EMV-compliant smart card terminals globally in the growing electronic payment space. Because of the enhanced security and multi-application features of smart cards, Verifone’s EMV terminal strategy is well timed to provide the incentive needed to begin replacement of the antiquated magnetic-stripe POS terminal infrastructure.
Aberdeen research also suggests that, as banks begin to offer more online banking services and applications, and the e-commerce security factor continues to grow as a key concern, the value proposition of smart cards will become more appealing. This assumption is largely based on the prospect of fraud reduction, lower processing costs, availability of additional applications, and acceptance of EMV-compliant, chip-based cards worldwide.
Such benefits will be key selling points in VeriFone’s new electronic payment strategy of providing pre-certified, pre-tested EMV hardware and software that can be leveraged across appliances, regions, and host interfaces. This transition will result in faster time to market and reduced costs, particularly for banks searching for more online-banking value propositions as well as e-commerce market differentiation. VeriFone’s strategy also provides a strong, market-oriented value proposition to help influence merchants to upgrade from magnetic-stripe-based POS terminals to EMV-compliant solutions.
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