The U.S. is closer to EMV readiness than many realize, and it may not cost as much as previously feared, suggests a newly crafted “roadmap” to U.S. adoption of EMV chip-and-PIN technology.
The base of EMV-ready payment terminals in the U.S. continues to grow, the Smart Card Alliance notes in the February 2011 white paper. That fact, combined with recent upgrades major card processors and acquirers have completed to their back-end systems to support EMV in Canada and Mexico and the emergence of certain new approaches to implementing EMV, could “greatly simplify” a U.S. conversion to the EMV standard, the alliance contends.
Twenty-eight payments-industry companies and organizations contributed to “Card Payments Roadmap in the United States: How Will EMV Impact the Future Payments Infrastructure?” Among them were all the major U.S. card networks and processors; such issuers as JPMorgan Chase & Co., American Express Co. and Discover Financial Services; major card manufacturers; and card- and data-security specialists.
“We are on the verge of being able to introduce EMV to the U.S., although we still have no mandate to do so,” Randy Vanderhoof, Smart Card Alliance executive director, tells PaymentsSource.
Such a mandate could come from the government or from major payment networks announcing a shift of liability for fraud to merchants that do not adopt EMV, as Visa and MasterCard has done in most countries that have adopted the smart card standard, he notes.
The U.S. remains the only major nation that has stayed with magnetic stripe cards, whose data crooks easily can skim and replicate to produce counterfeit cards. “All evidence” suggests card-skimming fraud will worsen now that Canada and Mexico have adopted EMV, Vanderhoof says.
And another EMV lure for merchants recently entered the equation: Visa Inc. on Feb. 9 announced that merchants conducting at least 75% of their transactions via EMV terminals will be freed from burdensome annual Payment Council Industry Data Security Standard compliance exercises (
That development could cause more U.S. merchants to clamor for EMV, Vanderhoof says.
“There has been a lot of uncertainty from merchants who feared that adopting EMV would not provide any relief from the high cost of PCI compliance, making EMV just another layer of costs for merchants,” he says. “But now Visa is saying that if most of your transactions are contact or contactless EMV, you don’t have to pay all these extra PCI compliance costs, which makes EMV much more attractive to U.S. merchants.”
Major U.S. merchants including Wal-Mart Stores Inc. last year signaled they would welcome a move to EMV (
Most major markets around the world have embraced EMV, but the U.S. so far has held off because of the scale of such a project and cost projections ranging from $5 billion to $13 billion. Moreover, U.S. fraud rates remain relatively low, the alliance notes.
But the indirect costs of shunning EMV are rising in the U.S., the alliance’s paper suggests.
Certain types of fraud in the U.S., including card skimming, are on the rise, some reports suggest (
Widespread adoption of EMV technology would not be as costly in the U.S. as it was for some other countries over the past 15 years that developed EMV technology “from scratch,” Voorhees says.
“The hardware is already there, and the major processing-industry leaders have now invested in EMV processing to support Canada, Mexico and other Latin American countries,” he says. “The infrastructure is coming together, and this didn’t exist a decade ago when many industry participants began to contemplate the feasibility of moving to EMV.”
The cost to convert a large market such as the U.S. is impossible to accurately estimate, but the alliance’s research suggests that “per-unit costs for (EMV-compatible) cards and devices have decreased” in the past few years as EMV has become standard worldwide, Vanderhoof says.
U.S. merchants and issuers planning for a possible U.S. move to EMV should consider whether new payment cards they issue will be contact, contactless or dual-interface, and issuers “may choose to implement only the options they need,” the alliance notes.
Acquirers and processors readying for a possible shift to EMV “will need to modify their systems to receive all possible types of chip data from POS devices and place the data into appropriate (fields),” the alliance suggests. They also will need to certify they are transmitting the appropriate fields to the payment networks.
Those involved in the ATM industry also should assess their readiness for EMV. “Although U.S. ATMs are not EMV-ready today, all major ATM vendors offer EMV-capable ATMs. And in some cases, existing ATMs can be upgraded rather than replaced,” the alliance advises.
“Merchants said they wanted a roadmap to U.S. EMV adoption, and we created one,” Vanderhoof says. “Now all we need is to start the engines.”
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