On August 9, 2011 Visa moved forward with a three-part plan to speed up the adoption of EMV chip technology in the United States. Globally, for both credit and debit cards, the standard represented 40.1 percent of the payment cards in circulation for the first quarter of 2011 with 71 percent of the POS devices in the world capable of using the cards. The U.S., however, has dragged its heels on embracing EMV cards, with companies issuing them to their customers who travel abroad and not pushing acceptance of the more secure standard for domestic transactions.
EMV Offers Strong Anti-Fraud Protection
When compared to traditional magnetic strip cards, an EMV card is much harder for thieves to manipulate for purposes of fraud. The authentication and verification of the associated PIN is automatically performed by the chip, with each transaction carrying a unique data “stamp.” This dynamic feature makes the card’s data relative to the given transaction only, and both symmetric and asymmetric cryptography are used. The entire system of key management is elaborate and secure to create integrity in the transaction.
There are no numbers on fraud with these cards in the U.S. for obvious reasons, but statistics gathered by groups like Banque de France, UK Payments Administration, and Interac in Canada prove that EMV technology lowers fraud at physical points of sale, at automated teller machines, from counterfeiting activities, and in scenarios where the card is not present.
Failure to Implement EMV is a Problem for U.S. Travelers
Another factor driving acceptance of the technology in the U.S., beyond the fact that EMV is a sophisticated and secure platform, is the fact that EMV has emerged as a global standard. American business travelers are not only inconvenienced, but are at a disadvantage when they travel abroad and attempt to use archaic magnetic strip cards that are refused at POS transactions and at unattended terminals. Additionally, in accepting EMV, merchants are positioning themselves to take contactless and mobile payments as well, like those enabled by near field communications on smartphones.
EMV Also Driving Mobile and Contactless Transactions
At the POS, a mobile payment transaction is not seen as any different than a card transaction since the payment is based on the EMV specifications. Although there are few contactless terminals in the U.S. at present — maybe 7 million locations representing 2 percent of merchants –more than 50 percent of Americans have smartphones. Their perception of what they can do with those units rather than just make phone calls is expanding daily, and they are rapidly becoming accustomed to the convenience of having a hand-held computer at their disposal.
Visa’s plans to accelerate the acceptance of EMV payment technology in the U.S. are well timed, and geared toward a market already ripe for the more secure transaction, with some banks and currency exchange companies already issuing EMV cards. Perhaps most significantly, Walmart is in the process of upgrading its POS devices for EMV compliance. The widespread adoption of the more secure EMV platform will depend both on consumer demand and attractive incentives like those being offered by Visa to merchants to make the change.
The EMV picture should look far different in the U.S. by the end of 2012, when the country should be closer to accepting that EMV cards are the global standard and that American consumers are being left wide open to fraud with the out-of-date metal strip technology.