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Everyone agrees EMV standards will grow in the U.S. But that's where the clarity ends, as the card networks' mandates carry subtle yet important differences.
April 1
It's a good time to be selling retailers payment technology, since the large card networks have mandated a set of rolling deadlines for U.S. merchants to get on board with Europay, Mastercard and Visa (EMV) payment standards. A new tech market is starting to take shape via a series of new partnerships and software.
"From what we can tell, the new EMV payment devices are starting to penetrate right now. There's really only about 250,000 new devices that have been deployed out there at this time…so it's really just the beginning," says Rick Olgesby, a senior analyst at Aite Group, who says the mix of EMV compliant devices, many of which will also include near-field communication technology to accommodate contactless mobile payments, will expand rapidly from here. He expects the marketplace as a whole to be ready for EMV and NFC payments in six to eight years.
While merchants in the U.S. gear up for EMV payments, there's been some recent activity among card issuers. Bank of America, for example, this week announced it would
But for substantial growth of domestic EMV payments, merchants will have to deploy new systems that will be mostly provided for them by merchant-acquiring financial institutions. EMV payments are already widely accepted in other markets, such as Europe, Asia and Canada. Adoption has lagged in the U.S. due to cost concerns. The cost of migration includes new payment terminals, chip cards and ATM upgrades. Estimates have pegged this cost at $8 billion to $12 billion for the U.S., with the POS terminals making up about half.
The large card networks are
That's where tech execs such as Bohdan Myroniw, director of business development for AJB Software (AJB), believe there's an opening. AJB, which sells integrated payment solutions, on Friday unveiled a service that's designed to smooth the EMV migration path for retailers and merchant-acquiring financial institutions. The firm's FIPay (or Flexible Integrated Payment System) software integrates into existing payment systems to enable the execution of EMV-compliant transactions. The software is validated by PA-DSS (a global payment card security standard developed by the Payment Card Industry Security Standards Council, or PCI) for EMV transactions.
"We're looking to remove the complexity of handing payments…and add new functions such as EMV chip payments," says Myroniw.
AJB has partnered with First Data (FDC) to
FIPay connects a merchant's point of sale system to AJB's retail transaction switch (RTS) network. FIPay collects and consolidates transaction data for credit, debit, gift, loyalty and other cards and formats the information according to the needs of the financial institution. Once this formatting is complete, the software transmits the message to the payments processor for authorization, than accepts the acknowledgement from the processor and passes the message along to the point of sale device. FIPay's EMV capabilities provide merchants with electronic payment authorization connecting retailers, banks and self-service kiosks.
Myroniw says that in the EMV migration chain, which includes firms that sell the point of sale equipment, merchants, and acquirers, AJB resides in the "middle," using its software to reduce the complexity in the testing done to certify EMV capabilities. The firm hopes that's an additional selling point, given the
As a result of this complexity, the payments tech market is being flooded by firms saying they can simplify EMV testing. Ascert, a firm that sells testing software, this week announced it was bolstering its suite of products by offering EMV-specific testing technologies in anticipation of the U.S. EMV migration. The firm's VersaTest Simulator EMV capable testing suite comes preloaded with EMV test cases in an effort to hasten testing.
And earlier in July, Clear2Pay, which markets payment technology, partnered with FIME, a consulting and market integration testing service, as part of an effort by both firms to tap into EMV migration demands in the U.S. while selling the experience of the two firms, which worked as partners on EMV migrations in other markets. FIME's services include EMV and RFID testing. RFID refers to "radio frequency identification," or the technology that drives near field communication for mobile payments. It's widely believed that the point of sale terminals that in the future will be able to initiate EMV payments will also support NFC.
The stress of the migration for both EMV and NFC payments on merchants and merchant acquirers was clear in the canned statements that accompanied Clear2Pay and FIME's release. Ian Kerr, general manager of Clear2Pay Open Test Solutions, said that "in a country where 'plastic' represents a very high payment value, EMV migration heavily impacts all touch points across the enter process chain." Pascal Le Ray, general manager of FIME, chimed in: "This is a challenging time for the U.S. market. By embracing secure-chip payment technology, the U.S. is getting ready to develop and establish an infrastructure that will support next generation contactless payments and NFC services."
Zil Bareisis, a senior analyst at Celent, says that given the complexity of the EMV/NFC migration, including upgrading or replacing terminals and testing to ensure compliance, "You're going to see a number of partnerships and coordinating across industries in this case."
