The growing adoption of contactless payment cards in the United States could open the door to a more fraud-resistant — and until now, expensive — security format that has taken off almost everywhere but here.
U.S. issuers have shown steadfast resistance to the Europay, MasterCard, Visa security standard, which uses cards with embedded chips and requires cardholders to enter PINs to authorize transactions at the point of sale.
Though executives generally agree EMV offers improved security over standard magnetic stripe cards, they also say banks and merchants here have little interest in footing the bill to distribute cards that feature the chips, or installing the necessary readers at the point of sale.
Contactless payment cards, however, could make the anti-EMV argument obsolete, payment executives say.
"There's no reason we can't support all the cardholder verification methods we have today," including EMV, using contactless cards, said Simon Pugh, the head of MasterCard Inc.'s worldwide global center of mobile excellence. "If you look at the technology, it's easy. If you look at the business processes and how you introduce it in a controlled and global fashion, it will require some thought."
Mr. Pugh said that the technical specifications of contactless and EMV are closely aligned; both formats define the way a card communicates with a card reader. For EMV, the readers access data stored on the chips in the cards to verify that the cardholders are entering the correct PINs. For contactless cards, the chips transmit the card account number to the reader using wireless technology.
Mr. Pugh said MasterCard helped develop both payment standards, and that the contactless format was designed to work with EMV. "It builds upon EMV technology."
He said there is no technical reason the chips in a contactless card cannot also store a PIN that could be used to authenticate cardholders.
In fact, Mohammad Khan, the founder and president of Vivotech Inc., a provider of contactless payment terminals and software, said both use the same basic components. Contactless uses "the same card, driven by the same chip" as EMV, he said. "But it has a transmitter in it as well."
Mr. Khan said that as more and more countries switch to EMV, criminals will shift more of their energy to the United States, where the mag-stripe infrastructure is easier to circumvent.
"The U.S. as a country is open to attack. The fraud people always move toward the weakest point," Mr. Khan said. "Every other country in the world has a deadline to move to EMV. I believe the industry needs a deadline in the U.S. as well."
Jeff Hale, the chief marketing officer of the New York payments software company ACI Worldwide Inc. , agreed. "Virtually every major market in the world is adopting EMV on some time line, except the U.S.," Mr. Hale said. "Where do you think the fraud is going to go?"
EMVCo LLC, the trade group that administers the security standard, said that EMV is in use, or being tested, in Europe, Asia, Latin America, South Africa, and Canada.
Canadian payments companies have been testing EMV in that country since 2007. In October the Canadian debit network Interac Association, along with MasterCard Canada Inc. and Visa Canada Association, announced plans to shift Canada's entire card acceptance infrastructure to EMV.
The conversion project is expected to run through 2015, but the companies said they expect the majority of Canadian debit cards and automated teller machines to support the EMV format by next year.
