EMV is the newest global standard for credit and debit card payment technology. Each EMV-compliant card contains a tiny, embedded microprocessor which holds all the required information needed to utilize the card for secure payment through EMV devices – such as PoS machines, and ATMs. EMV cards offer greater security to traditional magnetic stripe cards which are slowly but surely being phased out on a global scale.
While EMV is the current global standard, the world is far from a state of global compliance. The migration from magnetic strips to EMV is a major improvement for global payments, and the EMV standard represents a worldwide effort toward global interoperability and a step in the right direction against payment fraud. In many cases of fraud, information on magnetic strips is captured via a device that ‘skims’ the strip and then cloned onto a blank card which is then used to make fraudulent purchases.
EMV technology removes this risk by storing data on a chip embedded in the each credit and debit card. That data is protected by various security features that protect cardholders, retailers and banks from fraudulent activities.
EMVCo terminal compliance as of Q4 2012*:
- Europe: 95%
- Canada: 79%
- Latin America & the Caribbean: 79%
- Africa and the Middle East: 77%
- Asia and Pacific Rim Countries: 51%
* 1.62 billion EMV-compliant cards were in use at the time.
US Migration Rates Lag Behind the Rest of the World
America needs to step up when it comes to EMV migration. It’s partially because they have the most to gain – and lose. With such a huge economy, it’s imperative that the US migrates in unison in order to avoid bumps along the way. With the sheer number of cardholders, retailers and financial institutions, there is plenty of room for error if not approached properly.
What’s stopping America? Retailers fear the cost of replacing current strip systems will be greater than the cost of covering fraud losses. But card fraud is not limited to the US alone – and therefore must be fought on a global level.
Another issue in US adoption of EMV is a lack of leadership and direction from the government. In the absence of guidelines and mandates from the government, the country is left to formulate its own migration plan in the framework of global adoption. And with the US having one of the largest and most diverse payment ecosystems around, it poses problems on nearly every level.
One thing that will pressure US merchants to comply with EMV standards is the shift in liability set to begin in October of 2017 – the last of three worldwide liability shifts. In October of 2017, responsibility for card fraud costs will shift to merchants – which means they will have no recourse from card companies for fraud losses as the result of maintaining strip card technology. If merchants want to reduce or eliminate fraud costs, they will migrate to EMV.
Already, America’s lag-time in EMV migration is costing its banks and retailers. Fraud has been steadily making its way to the US from high EMV-compliance regions around the world. This fraud is typically in the form of “skimmers” – meaning the resulting cloned magnetic strip cards can only be used in non-EMV regions where magnetic strip cards are still accepted and used.
During the migration process, banks are re-issuing payment cards while processors are dealing with the tremendous volume of testing and certification from merchants and banks. The fact that testing is time consuming and that testing resources are in short supply are contributing to the slow rate of migration is some global areas, including the US.
One upside for the US being slow to comply is that it has entire continents to use as case studies for successful EMV implementation. Examples of migrations are in huge supply. Once the US and the rest of the world is fully on board with EMV, the entire globe stands to benefit – from banks and merchants all the way down to card holders.
EMV Into the Future – Everyone Gains, Including Consumers
Even with some of the uncertainty that surrounds EMV migration in the US and abroad, it’s easy to see the benefits of adoption. Security is enhanced and is passed up and down the commerce chain between card holders and financial institutions. This edges out the potential for fraud and reduces that expense for retailers, giving them one less cost to pass on to consumers.
Expect to hear more about EMV migration and compliance in the future as more milestones are passed.
Eran Feinstein is the founder of Direct Pay Online. Direct Pay Online provides global e-commerce and online payments solutions for the travel and related industries He is a leading authority in the fields of e-commerce, travel and payments, having acquired extensive experience from various parts of the world.