Card networks face pushback over mobile EMV acceptance tech

EMVCo, the major card brand-supported venture to establish EMV guidelines and specifications, has begun testing a program to determine if consumer mobile devices can securely accept contactless payments — a move that not only hastens the adoption of contactless payments, but renews criticism over which networks control technology and routing decisions.

In the past few years, EMVCo has been advancing its effectiveness and availability through the development of Secure Remote Commerce, or Click to Pay, and its 3-D Secure 2.0 upgrade. The test of contactless mobile payment acceptance, which began last month, simply furthers the same strategy.

The organization's goals also align with those of consumers, who want to find safer ways to make payments by reducing contact with other people during the coronavirus pandemic.

As other companies develop similar technology, such as MagicCube's i-Accept mobile contactless solution, EMVCo has positioned itself as seeking a consistent framework for these advancements. MagicCube operates as a software partner for projects like Visa's new Visa Tap to Phone.

EMVCo's testing program, called the Early Adopter Program, focuses on commercial off-the-shelf mobile devices with built-in contactless capability. As such, EMVCo aims to provide a framework for developing and implementing card-based contactless payment products that will work in the same manner globally, said Bastien Latge, director of technology at EMVCo.

"It's true that coronavirus has accelerated the demand for contactless, but EMVCo has not been rushed to deliver guidance on the use of consumer mobile devices with built-in contactless capability for payment acceptance," Latge said.

The Early Adopter Program has been in development since 2019, based on feedback from the industry requesting testing processes to support the growing use of consumer smartphones and tablets for contactless payment acceptance, Latge noted.

"Working with payments industry stakeholders over the past year, EMVCo developed this approach, and is now progressing with the pilot, to evaluate the technology and how it can deliver a consistent experience to merchants and consumers," Latge said.

For starters, EMVCo's program tests devices against EMV specifications related to the required read range for a contactless interface, so a transaction occurs consistently within the same close proximity to a contactless antenna.

The testing also determines how to further establish a consistent user experience for merchants and consumers, given the fact that many mobile devices vary in terms of battery power and life, as well as how they integrate with other antennas.

Rulemakers

The technical details aside, various merchant groups and the Secure Payments Partnership, representing independent debit networks, continue to look upon EMVCo announcements as the beginning of more edicts on how merchants have to accept and route mobile payments.

Earlier this year, the SPP voiced concern over the entire concept of Click to Pay, the card brands' online payment system, in terms of how it would ultimately drive transaction volume and routing. SPP now is voicing the same concerns over the Early Adopter Program and how it would influence standards, especially with Visa announcing its new tap-to-phone program and Discover adding Click to Pay to its payment options.

"EMVCo is Visa and Mastercard, and when they come up with technology standards like this, they try to give the appearance that these things are just technology and anyone can take them or leave them," said Doug Kantor, counsel for the SPP. "But they are run by Visa and [Mastercard], and they quickly grab the standard and say 'OK, everyone has to do it this way.' It really becomes a mandate."

The types of payments generated through Click to Pay are a mixed bag for the debit networks because the major brands have "consistently made it very difficult for merchants to route debit transactions that are done in-app in the way that they choose," Kantor added.

For its part, the SPP sees the Early Adopter testing program potentially creating specifications it would view as a violation of the Federal Reserve's Regulation II on debit card interchange fees and routing. At the same time, the SPP wants mobile payments to advance, particularly during the coronavirus pandemic.

"We think it is really unfortunate that, instead of working collaboratively to make that happen, Visa and Mastercard fall into the same pattern of using it as a competitive wedge to block business that could go to the smaller debit networks," Kantor said.

In many ways, the argument over contactless EMV payments is similar to that over the use of a common application identifier for EMV debit transactions seven years ago. That was a collaborative effort that resulted in common coding for the embedded EMV chips to allow alternate routing options.

"From the SPP's perspective, our whole message has been that we should work together and make it better for everyone over the long term," Kantor said. "But it is hard to dance when you don't have a dance partner."

EMVCo points to its collaborative efforts in secure payments technology, including an announcement last week that it was working with FIDO Alliance and the World Wide Web Consortium (W3C) to deliver guidance about how all of their technologies relate in terms of enhancing interoperability of web payments.

In that guidance, information is shared regarding Secure Remote Commerce, 3-D Secure, EMV payment tokenization, FIDO's updated specifications, and W3C's web authentication and payment request APIs. All of those specifications can be used together to enable more secure and convenience card-based payment during e-commerce checkout, the organizations said.

The 3-D Secure 2.0 security upgrade for e-commerce has taken hold in Europe, but is also stirring interest in the U.S.

"We anticipate the trend towards payments that limit contact to persist beyond COVID-19, and our focus is on providing specifications and testing programs that continue to support changing behavior at the physical point-of-sale and enable consistent and convenient payments," EMVCo's Latge said.