Oliver is leading a series of meetings organized by the Boston and Atlanta Federal Reserve Banks that includes about 30 companies and industry groups to discuss the future of payments in the U.S., which is far behind Europe and Japan's adoption of the chip-and-pin technologies included in EMV standards. The forum has met three times and is scheduled to meet again this fall; the plan is to issue a white paper at the end of the year. If Oliver's statement is any indication, it will argue for a faster migration toward chip-and-pin deployment in the U.S..
The forum is also looking at the issues of EMV migration in the U.S. and the ramifications of various security strategies on the evolution of NFC and mobile payments. "The Fed decided it should understand more of what's going on in the mobile marketplace, who's involved, and what role the Fed should play," says forum member Lisa Stanton, the executive director for global alliances at Monitise Inc.
The big question the forum members are asking themselves, says Stanton, is if the current payment system is really broken enough to warrant the cost of fixing it. What are the benefits and drivers to chip technology?
The cost isn't a small issue. The Smartcard Alliance estimates that six million merchant devices may need to be replaced or upgraded for chip-and-pin technology, with the bulk of the cost falling on merchants. However, Oliver also writes the cost of not converting might be significant in other ways-specifically, less security and less innovation.
"First, we may become the only substantial economic power dependent on a payments standard that is less secure than that of the rest of the world. That means that criminals, intent on profiting from card fraud, will continue to migrate to the United States in growing numbers. The second issue is that chip-and-pin technology is a critical element in progressing toward an even more secure and visionary goal-the deployment of mobile phone-based payments capabilities using a chip embedded in the phone. ...Chips embedded in the phone, coupled with applications loaded on the phone from card-issuing banks, will create the effect of a 'mobile wallet' that promises to be more convenient and, yes, more secure than what we use today."
Some observers worry about an arm of the government becoming so involved in how private industry adopts an emerging technology. But Avivah Litan, a vp and distinguished analyst at Gartner, says it's appropriate for the Fed to become involved, raise awareness and agitate for policy changes. "It's good the Fed is taking a leadership role. It gives people a chance to meet each other and network, and that's the way you get things down." As for banks themselves, Litan says they have a vested interest in working with the Fed and the rest of the forum. "Incrementally, if banks don't do anything, mobile payments will occur anyway. Banks need to stay on top of payments."
Certainly the Fed's Oliver wants to keep the discussion top of mind. "If we want to mitigate the possibility of the United States being a center of card fraud and enable our consumers and business folks to travel abroad more easily, it may be time to charge someone in government with developing a well-thought-out, participatory, multi-year plan to move this country to the emerging global payments card standard."
