The US market is at a potential turning point for EMV. This smartcard technology standard brings personal security benefits to cardholders, but EMV can also be a game changer for payment service providers. Multi-application, multi-use smart cards can unlock and drive unprecedented value in consumer payment programs. As the US weighs up the EMV challenge, the country finds itself uniquely positioned to capitalize on the promise it brings.
A History Lesson
In Europe, where EMV is at its most advanced, the payments industry is yet to harness the full extent of EMV's commercial benefit. The promotion of EMV in the early days focused on consumer protection and anti-fraud campaigns. Fast-forward to today and the overwhelming benefits experienced by customers are still those of security and convenience. That’s not a bad thing but in itself EMV’s potential to deliver a richer payments experience is still nascent. For example, this article reflects the conversations people were having six years ago on how EMV could deliver value beyond transaction security. We're still talking about the same untapped potential now.
This potential is what should win over US participants and help the market to put EMV’s value into a commercial context. Uniquely, the US can now draw insights from a decade of global migrations and take a leap ahead in EMV deployment to deliver real commercial advantage.
Securing the EMV argument
One of the most common criticisms of EMV is that the US doesn't need the extra security it provides. America's payments infrastructure has already grown into a sophisticated multi-party ecosystem with on-line authorization and layers of anti-fraud systems in place. But EMV is a proven and compelling anti-fraud measure. EMV offers better control over authentication and authorization than magstripe. EMV, when deployed with PIN, authenticates the cardholder, and is an effective barrier against the high costs of fraud as a result of identity theft, skimmed cards, and stolen cards.
Critics also say that EMV doesn’t address rising fraud on the Internet. However, this is a flawed argument. EMV is not aimed at Card Not Present situations. It is however targeted at contact and contactless payments, where it is helping to combat rising fraud levels. UK studies show a 64% drop-off in face-to-face card fraud following the introduction of EMV. As a result, the opportunity to skim card details and reuse them on the Internet is lower. In addition, the card schemes offer complementary security methods (based on two-factor authentication) specifically for CNP scenarios.
Fraud will always migrate to the weakest channel and EMV protects card-present environments from being so. And that’s the key reason for implementing EMV. It also provides the basis for securing two form factors which are experiencing strong consumer adoption: contactless and mobile payments. CNP, while it is a problem, it is a different issue and not a reason why EMV should be dropped. No security method provides 100% protection across all channels but EMV goes furthest in protecting consumers against fraud.
EMV is a success story wherever it has been adopted. Card present fraud is reduced and consumers and merchants have more confidence in card payments. But, despite this success, EMV can still do much more. If EMV is ever represented as just a security play, this undervalues a standard brimming with commercial promise.
The last great card market to embrace EMV
EMV can be a game changer for consumer payments. The US has an unprecedented opportunity to start from a clean slate, with very little smart card legacy, and leverage it to deliver innovative EMV programs. It should be able to maximize EMV’s potential in a way earlier adopters could not. It is uniquely positioned to take advantage of being ‘late to the party.’
At the heart of this potential is the EMV chip on which sophisticated applications can be delivered, often simultaneously. This gives issuers a platform to respond dynamically to changes in consumer behavior. EMV can therefore be the basis for competitive advantage and consumer loyalty.
The combination of a multi-application, multi-use architecture and ease of updates, opens the door for huge advances in payment and non-payment uses such as reward, affinity, coupon, identity and public transit programs, all contained on a single card. The US is also one of the first markets to deploy contactless at the same time as EMV through the so-called dual-interface standard. This opens the door for many more applications from day one.
With EMV, you no longer need to issue or reissue multiple cards to support different applications or updates. Applications can be upgraded or added at ay any time after the card has been issued because EMV cards can be updated Over The Line (OTL).
Other non-payment card applications are now much more mature. Public transportation is one good example, other countries have deployed parallel ‘tap and go’ schemes but these could be easily integrated into a single payments card. Likewise loyalty applications are now much more mature and could also exist on an EMV card. The more use your cardholder has for your card the more your product stays front-of-wallet.
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It’s now time for America to leverage its culture of innovation to show the world what EMV can do – to exploit it’s potential to deliver truly exciting and innovative card programs. The leading theme of America's EMV conversation should really be the opportunity for payments innovation and commercial success that EMV can bring. This should be the message to participants trying to build business cases for a transition to EMV. Here’s hoping the US can realize the promise of more valuable and sophisticated consumer payment applications.
Simon Rogals and Paul Kennedy are consultants with Acquirer Systems.