With EMV deadlines approaching, merchants, acquirers, issuers and consumers are all going to be affected as new merchant terminals and messaging protocols must be developed and customers need to be educated about what EMV will mean for them. Today, there is a growing incompatibility between traditional magnetic stripe payment cards still used in the U.S. and widespread EMV acceptance abroad. EMV adoption is no longer an option, as the U.S. needs to catch up as well as lessen the risk of fraud migrating to the U.S. from other countries that use more secure EMV technology. In addition, mobile payment acceptance is quickly accelerating and will need EMV terminals to fully leverage this form of payment. EMV needs to permeate the payment system here, and there are now guidelines and deadlines in place to make it happen.
The EMV standard was first introduced in 1994, when Europay, MasterCard and Visa formed EMVCo, and the EMV organization defined the interoperability standards for chip-bearing smart card technology. EMV is not a technology itself; it is a global standard for chip-based payment cards and acceptance devices. These standards dictate the physical nature and capabilities of the chip, the format of the hosted data applications and the way they interact with point-of-sale (POS) devices.
• As of April 1, 2013, acquirer processors are required to support merchant acceptance of chip transactions; some infrastructure updates will be required.
• In October, 2015, the liability will shift to acquirers for domestic and cross-border counterfeit fraud card-present POS transactions if the merchant does not have an EMV-enabled POS device.
• In two more years, October, 2017, the liability shift takes effect for transactions generated from automated fuel dispensers - this allows more transition time to account for higher equipment/pump costs.
As these new standards come into play, EMV will affect the entire payment system and its players, from acquirers, to issuers, to consumers –all in very different ways. Mandates and deadlines are quickly approaching, although banks and merchants tend to believe they have more time. In order for EMV to be successfully adopted, every player must do their part and be prepared for conversion. There are several steps, all along the chain, to best ensure that this happens.
Step One: Processors and Acquirers Prepare for EMV – Certify to the Card Brands and Update Software at the Point-of-Sale
It’s estimated that over 16 million devices will need to be upgraded to support EMV payments in the U.S. alone. The costs will range from $200-$1500 per device, a substantial expense for acquirers and a considerable change for the industry. As EMV certification standards are very rigorous to ensure security, acquires need to make sure every EMV capable device or solution they install is in fact EMV certified. Each device will need to have the software in the proper EMV data, interfacing in applications with the appropriate function and feature parameters. With such a new dynamic and interactive environment, it is more important than ever to properly certify EMV card acceptance and equip merchants with the tools they need to be able to accept secure, safe and effective payments. Essentially, in conjunction with processors certifying their readiness to support EMV with the card brands, specifications need to be updated for POS software development to accommodate EMV.
Processors and Acquirers will have to:
o Add EMV data elements to authorization and clearing messages
o Review disputes processes to support EMV
o Certify network interfaces, authorization, and clearing for Card Brands
o Educate the merchant and provide staff training assistance
Step Two: Issuers Implement EMV Cards
With updated point-of-sale interfaces to support EMV, issuers need to implement the newly defined standard and arm cardholders with EMV cards. Visa recently expanded its EMV migration roadmap to include debit cards and ATM's. Essentially, Visa will provide some of its proprietary EMV chip technology to debit card issuers to help facilitate adoption and compliance with debit regulations, helping to move the cause along. It will fall on the issuers to educate the consumer and bring this technology into practice. EMV provides some leeway for issuers to select their own approach to authentication methods and online/offline processing, so these are the decisions they need to make.
• To implement EMV successfully, issuers will:
o Support EMV data elements in authorization messages
o Define chip cards feature, functionality and interface capability
o Enhance risk management systems to leverage chip
o Determine the card migration strategy
o Update customer support and operational systems to support chip cards
o Certify network interfaces, authorization, and clearing for card brands
o Replace card base
o Educate the consumer
Step Three: Usage in the Hands of Consumers
Mobile payments continue to come into practice, and will inevitably change the world of payments. As consumers turn to a world increasingly controlled by their mobile devices, they will play a significant role in adoption of “contactless EMV”. With EMV, consumers will become much more actively involved in the payment transaction experience, as they are today in markets such as grocery and petroleum, regardless of whether they are using an EMV chip card, or a contactless EMV card or a mobile device. This transition to increase cardholder involvement will continue with EMV in markets such as specialty retail, where the merchant has been doing virtually all of the input to-date for credit card purchases. The issuers will need to play a role in educating cardholders on their new, expanded role in administering the purchase experience with their EMV card. In addition, acquirers will need to train merchants on the new user interface flow for purchases using EMV cards, so they can assist the consumer as the EMV payments begin to be accepted.
Benefits for the consumer include the following:
• Fraud Reduction: Data from the chip will be examined by the issuer as part of processing each transaction, which prevents card cloning. Also, dynamic data will exist that is only pertinent for one transaction. If the card payment is compromised, a counterfeit attempt would not be usable at the point of sale; without the ability for multiple fraudulent transactions per card, this in turn makes the stolen cardholder data less valuable for criminals. Personal Identification Numbers (PIN) that are tied to a specific chip on the card prevents fraud as well.
• Global Interoperability: US cardholders will be able to make purchases abroad, and foreign visitors will be able to use their chip cards in the U.S.
The key to ultimate EMV success is to ensure partnership with the right processor, issuing platform, point of sale software providers and an understanding of their priorities. For consumers, EMV will be at minimum a step toward widespread adoption of contactless/NFC/Smartphone usage for payments.
Joe Cohane is the CEO of Veracity Payment Solutions, a North American acquirer that provides payments solutions to more than 100 financial institutions.