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The State of EMV

Following Visa's push for the adoption of EMV in the U.S., bankers are debating whether the standard will emerge from the mix of innovations in the payment space as the next widely adopted domestic payment solution.

A bigger challenge may lie in getting the infrastructure in place to easily facilitate all of the loyalty aspects that could help drive EMV acceptance among consumers. "That engineering is significant," says Conroy McNelley. "Now you have to have communication between the payment device and the terminal and the cash register software to be able to recognize these discounts or incentives. That's a really big hurdle.

"To think that in four years, which is the deadline for the Visa EMV liability shift, we're going to have this robust payment structure in place along with the loyalty -- that's just crazy talk," she continues. "There's no way we're going to be there that soon."

From a bank perspective, just gaining an understanding of EMV across the organization is a major challenge, adds Wells Fargo's Schindewolf. "Many card-issuing banks are very large institutions -- we're involving fraud, marketing, disputes, banker trading, card ordering and more," he says. "There are a number of aspects that are touched by this, and getting people up to speed, as always in any large enterprise, has its challenges."

Complementary Payments Solutions?

Add to the EMV speculation all of the buzz surrounding mobile payment technologies such as Google (Mountain View, Calif.) Wallet or Square (San Francisco), and any vision of where payments are headed in the U.S. can become even fuzzier -- something JPMorgan's Porter calls "the payments swirl." "If we all knew what was going to emerge from this swirl of new payments, we'd all be putting our resources, time, energy and money into it," he says. "The fact that we're not means it's not clear."

Aite's Conroy McNelley says more than one type of payment likely will emerge from the so-called swirl because some technologies, particularly EMV and NFC-enabled mobile, easily complement each other. "I don't think this represents an either-or scenario," she explains. "The terminals that are required to facilitate mobile payments are the same type of terminals that are required for EMV. If people are deploying EMV to be in compliance with the Visa mandate, that will help speed the mobile payments process, and vice versa."

Bank of America Merrill Lynch's Phalen agrees. "We feel that NFC will be the next natural evolution in the card payments space and will occur concurrently with the issuance of chip and PIN," he says.

Mobile payments solutions could benefit from a shift to EMV, particularly if Visa's push to adopt both contact and contactless payment terminals catches on, according to Nice Actimize's Knieff. "It creates a really cool opportunity for issuers because, with contactless, you can start to look at all sorts of different form factors that aren't plastic cards," he comments.

But until the majority of customers become comfortable enough to ditch the plastic cards to which they've become so accustomed, EMV-enabled cards provide at the very least a transition away from the insecure mag stripe. "Folks can be overly optimistic about consumers' propensity to change their paying patterns. It's going to take some pretty significant changes and incentives to change consumer behavior," says Aite's Conroy McNelley, adding, "As long as we're stuck with cards, we should be making them more secure. And if we can make them more secure in a way that could potentially speed up mobile payments, then it's kind of a win-win situation."

For now, banks such as Wells Fargo are keeping a watchful eye on payment developments in the U.S. "We want to see how the domestic market unfolds," says Wells Fargo's Schindewolf. "If it begins to adopt EMV, we'll keep pace with the market."

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