It appears it might take at least a few more painful payment-terminal tampering breaches like those Lucky Supermarkets and Michaels Stores Inc. experienced last year before U.S. merchants and card issuers take action to support EMV chip cards.
EMV chip technology blocks most point-of-sale counterfeit card crime because it requires a unique card-present authorization for each transaction, security experts say. The technology has dramatically reduced such crimes in Europe and other regions where EMV has become the dominant standard.
But despite a few moves, the lack of coordinated action to adopt EMV in the U.S. is a growing concern, observers say.
Several large banks have announced plans to offer EMV cards to customers who travel frequently abroad, and some issuers plan to make EMV cards available more widely this year. But most merchants are lying low.
No significant movement has resulted so far from Visa Inc.’s unveiling in August of a series of incentives designed to encourage merchants to accept EMV cards, and no other card brand has yet backed Visa’s move with similar incentives (
In the months since Visa’s announcement, card-data breaches and tampering incidents “have not leveled off at all,” Avivah Litan, Gartner Inc. vice president and distinguished analyst, tells PaymentsSource. She suggests there is “no reason to believe more merchants will not get hit” with costly tampering incidents this year.
“The only thing that will stop the tampering incidents is when the industry upgrades security on its payment terminals (to EMV), and as fraud rises it will really begin to hurt banks and individual merchants,” Litan says.
Indeed, Visa’s EMV-migration announcement is a prod, “but it is not the guiding impetus,” in merchants’ potential EMV-migration plans, Dom Morea, First Data senior vice president and division manager, advanced solutions and innovation, noted in a November 2011 white paper.
“Oddly enough, the major factor that could push our industry toward EMV is recent legislation that had little to do with smart cards,” Morea said.
Morea contends the Durbin amendment, which resulted in new, lower debit interchange rates that went into effect Oct. 1, is the spark that finally may compel banks and merchants to adopt EMV because “every dollar lost to fraud now looms large.”
But even if banks and merchants mobilize to adopt chip cards, the path to EMV migration is unlikely to be smooth, Morea said.
“It is expected that many industry players will put forward guidelines or even directives around the payment standard, likely resulting in a sea of not-so-standard approaches that must be reconciled,” he said.
And a major change in card-payment standards, such as the movement to EMV, “can’t be effective unless the entire ecosystem gets behind the migration,” Morea said.
According to Visa’s EMV migration roadmap, by October 2015 liability for fraudulent Visa EMV transactions in most cases will shift to acquirers from issuers if their merchants are not equipped to accept contact and contactless chip transactions. Gas stations have until October 2017 before the liability shift takes effect.
MasterCard Worldwide in September said it will extend its existing EMV liability-shift mandate for cross-border Maestro-brand ATM transactions effective April 19, 2013 (
As a result, if a chip card is presented at an ATM not equipped to process cross-border transactions, liability will shift to the ATM host owner, MasterCard has explained.
A broad U.S. move to adopt EMV card technology would help block payment card tampering that has resulted in millions of dollars of losses to banks and merchants, but it will have little effect on card-not-present losses.
“There is still a serious problem with card-not-present fraud that EMV doesn’t address. But at the point-of-sale level merchants have an opportunity to upgrade hardware, and it is just a matter of time before they will have to take action,” Litan says.
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