By 2015, the U.S. will no longer be a non-EMV market and will see widespread adoption of the chip-and-PIN cards used in much of the rest of the world. Here's three reasons why:
EMV is Already Partially Here
In 2013, American Express joined the "Corporate Credit EMV Card club." American Express is now offering EMV for their premium corporate cardholders - Platinum and Centurion. From 2011 onwards we have had U.S. Bank, Chase, Wells Fargo and BofA offering EMV for their corporate clients. This shows that at the minimum, cardholders who travel extensively in corporate America now have a safe and secure payment vehicle.
Meanwhile, the $3.7 billion United Nations Federal Credit Union in Long Island City, N.Y., is known to be the first credit union to issue and distribute EMV-enabled cards to a significant portion of its card base. State Employees’ Credit Union, in Raleigh, N.C was the largest issuers of consumer EMV debit cards in the U.S. The $25 billion credit union rolled out EMV-enabled debit cards to 1.1 million debit card holders out of their total 1.7 million members in 2012.
I strongly believe that 2014-2015 will lead large U.S. financial institutions to focus on consumer cards. The above trend is a key contributor to making trend two a reality:
Fraud liability shift goes into effect October 2015: Today’s investment on EMV pays off in 21 months
In the U.S today, federal law limits the liability of card holders to $50 in the event of theft of account in information or the actual credit card, regardless of the amount charged on the card, if reported within 60 days of receiving the statement. The card issuer has zero liability if just the credit card account number is stolen. So who bears the loss? Merchants and the financial institutions.
Beginning in October 2015, the canvas will be different - merchants and the financial institutions that have made investments in the most secure EMV options will be protected from financial fraud liability for card-present fraud losses for both counterfeit, lost, stolen and non-receipt fraud. The first merchant in the U.S. to accept EMV cards in many of its stores is Walmart. And to follow, Sears, Target and CVS Caremark are rolling out Chip and PIN at an accelerated pace. Visa, MasterCard and AMEX have milestones towards minimizing fraud liability, or shifting fraud liabilities to EMV non-compliant parties, beginning with Visa’s by October of 2015.
EMV will heavily influence the NFC POS terminal
The obvious implication of trend two is that merchants across these countries will be forced to adopt EMV-enabled POS terminals, causing some to question the costs involved in this transition. The traditional magnetic stripe card can commonly cost as little as 20 cents each, whereas EMV cards have the potential to cost up to $10. With 23.8 million EMV terminals worldwide as reported by EMVCo, there is strong evidence that POS devices cost have been going down. It is needless to say that the investment far outweighs the expense as it is more secure and has the capability to significantly reduce fraud resulting from counterfeit card acceptance, greatly benefitting U.S merchants.
Implicit fallout will be the impact that EMV standards will have on the mobile payments landscape. In the process of upgrading to EMV standards, many merchants will also include the contactless readers (a device that uses radio waves to communicate with both read and write data on a smart card. They are used for electronic payments, and are commonly located near PIN pads, cash registers and other places of payment at merchant locations) and will simultaneously become NFC payment ready. This changing technological landscape will set the groundwork for widespread NFC mobile payment accessibility in the U.S. and in other markets that are on a similar path. A new research report from the Berg Insight forecasts 86% of POS terminals in North America will accept NFC payments by 2017 Berg expects in-store m-Wallet volume to grow dramatically to $44 billion by 2017 as Google Wallet, Isis, and other major initiatives finally build momentum. The simplicity, instant interaction and quick transaction capability of NFC technology on a EMV platform will attract many customers, especially the millennial generation that tends to want to get things “now,” get work done instantly and is very comfortable with using mobile devices.
Bikram Saha is Director – Solutions, Banking and Financial Services, for Virtusa