Many indicators suggest the U.S. payments industry is ready for widespread adoption of the EMV Integrated Circuit Card Specifications in payment cards, a report said.
Several top U.S. issuers plan to issue EMV cards within the next year to certain cardholders, most likely international travelers hoping to avoid problems making purchases and ATM withdrawals outside the United States, the report from the Members Group said.
Aris Jerahian, vice president of client relations for the consulting firm, wrote in the Dec. 15 white paper that cardholders traveling overseas spend on average six times more than nontraveling consumers and generate nearly 4% of all credit card spending.
U.S. merchants have widely debated converting their systems to accept EMV cards, also called chip-and-PIN.
Wal-Mart Stores Inc. this year said it and the industry need a domestic EMV program as protection against point of sale payment fraud.
Financial institutions also are adopting the technology, if slowly.
In May, for example, United Nations Federal Credit Union announced plans to offer consumers an EMV credit card. Travelex Currency Services Inc. issues chip-and-PIN prepaid cards at its 180 U.S. retail sites and plans to distribute even more cards to about 2,000 retail banking partners, including U.S. Bancorp and HSBC, early next year.
EMV cards enhance security and prevent fraud, Jerahian wrote. Canada reported that credit card fraud overall there fell more than 20% in 2009.
EMV technology aids in fraud prevention because the merchant is able to verify that the person using the card is authorized before the transaction takes place, according to Jerahian. Transactions both in person and online initiated with magnetic stripe cards are based on the standing of the account, not whether the cardholder is the authorized user, he wrote.
EMV is designed to prevent fraudsters from cloning payment cards by preventing them from obtaining the PIN associated with the card.
During a transaction, the point of sale terminal communicates directly with the card's chip, which verifies both the PIN and the transaction details without any information leaving the terminal, Jerahian noted.
Aside from an increase in security and fraud prevention, financial institutions also should recognize that launching an EMV card program can help improve cardholder loyalty, retain and attract higher-spending cardholders and expand card portfolios, Jerahian wrote.
Indeed, while much of the industry remains hesitant to use EMV, Jerahian wrote, several trends point to wide-scale adoption of chip-and-PIN technology to support EMV in the United States within the next few years.
