Visa Inc.’s new U.S. EMV initiative will have far-reaching consequences for merchants and card issuers, but the other card networks may not follow it exactly in drawing their roadmaps for migrating to advanced chip card technologies, certain observers say.
Although U.S. merchants for years have clamored for more-secure payment card technology, Visa’s move falls far short of what they ultimately would like to see in the U.S., Dodd Roberts, president and CEO of the Irving, Texas-based Merchant Advisory Group, tells PaymentsSource.
The group, comprised of 50 of the nation’s largest retailers, including Wal-Mart Stores Inc., Best Buy Stores Inc., Walgreens Corp. and McDonald’s Corp., “was in the midst of” trying to build cross-industry support for consistent new card-payment technology standards when Visa unveiled its own EMV-migration plans, Roberts says.
Visa on Aug. 9 announced a series of incentives for a U.S. migration to an EMV contact and contactless payments infrastructure, including incentives and deadlines for shifting liability to noncompliant EMV merchants (
“We think the best approach to migrating to EMV would be to have a collaborative process made collectively by merchants, card networks and financial institutions,” Roberts says. “It’s not helpful to have independent individual announcements come out for strategic reasons that are not coordinated, fostering different rules and timetables for the various players.”
The Merchant Advisory Group also is “concerned” that Visa’s EMV initiative does not require PIN-based chip card transactions.
“We’re very disappointed that there is still such a strong reliance on signature as a cardholder-verification method and no concurrent plan from Visa for preventing fraud in card-not-present transactions,” Roberts says.
The other card brands so far have not indicated whether they plan to follow Visa’s lead in setting liability-shift deadlines for industry participants to adopt the EMV standard. Though card networks eventually aligned their policies in other markets that migrated to EMV, there is no certainty they will do so in the U.S.
Rival card brands may bide their time before specifying their own EMV-adoption guidelines, or they may take a much broader approach with more specific technology standards encompassing both EMV and mobile payments, one analyst suggests.
“If you read Visa’s announcement closely, it’s obvious that a lot of the move to EMV has to do with readying the landscape for mobile payment, which suggests that eventually Visa will need to come out with far more comprehensive mobile-payment technology guidelines,” Jim Schlegel, product manager at payments software developer ACI Worldwide, tells PaymentsSource. “It’s possible that by the time MasterCard reacts to the evolving new payments technology, its guidelines will be much broader, addressing more than just EMV.”
Meantime, the three other major U.S. card brands are not tipping their hands.
A MasterCard Worldwide spokesperson offered no details about whether MasterCard plans to push EMV in the U.S., but the company noted in an email that MasterCard “has been a pioneer in EMV development” worldwide, supporting migration to EMV in major markets.
In another email, a spokesperson said Discover Financial Services is “ready to process EMV payments in the U.S” and that Discover “is committed to using global standards to help insure interoperability and ease implementations for merchants, acquirers and issuers.”
American Express Co. said in a statement “there are markets today, like the UK, where we already offer chip-and-PIN (cards). ... We have not had a large number of cardmembers in the U.S. requesting cards with chips.”
In other markets that have migrated from magnetic stripe cards to EMV technology, brands have generally followed one another’s liability-shift guidelines, observers note.
Visa in 2004 was the first to signal plans to migrate to the EMV chip card standard in Canada, with MasterCard following a year later with its own, similar adoption guidelines. Both networks’ Canadian EMV liability-shift rules went into effect in March, after a six-month postponement (
Amex last August was the last network in Canada to announce its EMV guidelines when it set Oct. 31, 2012, as the date issuers, merchants and acquirers supporting Amex will become liable for credit and charge card fraud initiated with mag-stripe cards that chip-and-PIN technology could have prevented (
Canada’s case for adopting EMV was “somewhat different” than that of the U.S., says Catherine Johnston, president and CEO of the Advanced Card Technology Association of Canada.
“Credit card issuers were eager to promote a move to chip-and-PIN to cut fraud because they were bearing most of the cost of counterfeit card transactions,” Johnston says.
Nevertheless, the major card brands probably will move in concert regarding EMV basics in the U.S., particularly because EMV Co. Ltd., the group that oversees chip card standards and interoperability issues, is a joint initiative co-owned by card networks, Johnston says.
“It’s reasonable to assume that the other card networks will eventually make an announcement to their members about a move to EMV, but the others need not be accompanied by a liability shift,” Johnston says.
Others generally agree that the U.S. card networks will support one another’s EMV guidelines.
“It’s hard for me to imagine there won’t be an alignment of EMV requirements, incentives and liability-shift issues between Visa and MasterCard and, to a lesser extent, Amex and Discover,” Randy Vanderhoof, executive director of the Princeton Junction, N.J.-based Smart Card Alliance, tells PaymentsSource.
“If you look at the path of other card-brand technology initiatives, MasterCard was the first to get out there with contactless-payment technology and set industry standards, then there was quite a gap before Visa did, and then the others. But ultimately all of them agreed that platforms should be interoperable at the point of sale because all recognized that the point-of sale experience to the consumer should be seamless and one brand should function like another,” Vanderhoof says.
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