Cost of Adoption, Economy Influence EMV Adoption in U.S., Fed Bank Exec Says

CHICAGO — As the U.S. determines how to adapt to payment technology trends spreading around the world, the timing of any changes may be influenced more by cost than anything else.

"Technology turns are happening more rapidly than ever before," Richard Oliver, the Federal Reserve Bank of Atlanta's executive vice president, said Tuesday at the Smart Card Alliance's annual conference.

"Unfortunately, our ability to update [older] technology doesn't happen quickly," he said.

Migrating to the EMV Integrated Circuit Card Specifications, commonly called chip and PIN, in the U.S. has become a prime discussion topic for issuers. But industry players are asking themselves many questions before committing to any change, Oliver said.

While other countries have at least begun technological improvements at the point of sale, Oliver said the U.S. has yet to start. "If we change [to EMV], will we be so late to the market that we'll have to change again soon" to another payment form? Oliver said.

Oliver also questioned whether a change to EMV to target a certain consumer subset was enough. JPMorgan Chase & Co. and Wells Fargo & Co. recently said they would offer EMV cards to travelers who visit countries where such cards are prevalent. JPMorgan Chase's version lacks a PIN.

U.S. residents have complained about difficulty using magnetic-stripe cards in some countries, and even today they have few options for an EMV-compliant card.

Oliver gave examples of several technology initiatives that are taking longer than expected to implement.

Europe's Single Euro Area Payments system is in a state of flux, Oliver said. SEPA is an initiative the European banking industry launched in 2002 to link Europe's disparate national payment systems into a standardized debit system usable for cross-border debit transactions.

The European Commission has extended the deadline for banks to support SEPA credit transfers and direct debits to the end of 2012 because banks were not able to meet the original December 2010 deadline.

Oliver also referenced the U.K.'s attempt to phase out paper checks in the next several years.

The economy plays a role in any future decisions, Oliver said. "In the wake of the economic depression, the temptation exists to not fully implement new technology over a five- or six-year period," he said.

Should the industry delay implementation, however, it could find itself behind "a couple" of technology cycles, Oliver said. He urged issuers to work with companies involved with technological innovations, particularly in the mobile space.

To accelerate implementing new technology, "you have to partner with new providers," Oliver said. "It's a very hard thing for banks to do, because you give up a bit of independence. But that's what you have to do."

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