CHICAGO—New technology and its associated costs are causing a dilemma in the United States payments space as the industry needs to determine when to adapt without falling too far behind other countries, an executive from the Federal Reserve Bank of Atlanta told attendees here during a panel discussion May 3 at the Smart Card Alliance’s annual conference.
“Technology turns are happening more rapidly than ever before,” said Richard Oliver, the bank’s executive vice president. “Unfortunately, our ability to update [older] technology doesn’t happen quickly.”
Migrating to EMV chip-and-PIN technology in the U.S. has become a prime discussion topic for issuers. But industry players are asking themselves multiple questions before deciding on a change, Oliver said.
While other countries have at least begun technological improvements, Oliver said the United States has yet to start, referring to the migration to EMV. “If we change [to EMV], will we be so late to the market that we’ll have to change again soon” to another payment form? Oliver asked audience members.
Oliver also questioned whether a change to EMV to target a certain consumer subset was enough. JPMorgan Chase & Co. and Wells Fargo & Co. recently said they would offer high-security cards adhering to the EMV Integrated Circuit Card Specifications to travelers who visit countries where such cards are prevalent.
Oliver gave examples of several technology initiatives that are taking longer than expected to implement.
Europe’s Single Euro Area Payments system is in a state of flux, Oliver observed. SEPA is an initiative the European banking industry launched in 2002 to link Europe’s disparate national payment systems into a standardized debit system usable for cross-border debit transactions.
The European Commission has revised the deadline for banks to support SEPA credit transfers and direct debits to the end of 2012 because banks were not able to meet the original December 2010 deadline (
Oliver also referenced the United Kingdom’s attempt to phase out paper checks in the next several years.
The economy does play a role in any future decisions, Oliver admitted. “In the wake of the economic depression, the temptation exists to not fully implement new technology over a five- or six-year period,” he said.
Should the industry delay implementation, however, it could find itself behind “a couple” of technology cycles, Oliver added. He urged issuers to partner with companies involved with technological innovations, particularly in the mobile space.
To accelerate implementing new technology, “you have to partner with new providers,” Oliver said. “It’s a very hard thing for banks to do because you give up a bit of independence, but that’s what you have to do.”
