September 11, 2015
US Consumers are finally climbing up the ladder as it relates to payment card technology. US banks have been sending their cardholders new cards with shiny new chips on them, along with educational inserts and helpful email communications. POS terminals with EMV card slots have been showing up at retailers for some time now, but it’s been possible to use the new cards in those new slots since only recently and in only a few places. There are no signs of any mass confusion just yet and the world is not quite coming to an end, yet it remains to be seen how quickly we will transition to ubiquitous usage of the new insertion slot vs. the old swiping slit.
As we get close to the day of reckoning, October 15 2015, we thought a quick primer and timeline of EMV progression would be timely:
What is EMV?
EMV is a global technical standard, norm or requirement for credit and debit cards, payment terminals and ATMs which accept them. EMV derives its name from the creators of this standard, viz. Europay, MasterCard and Visa. The EMV standard requires credit and debit card payments to be processed using cards that contain a microprocessor chip. EMV is now managed by EMVCo, an alliance controlled by six member organisations which include American Express, Discover, JCB, MasterCard, UnionPay and Visa.
How are EMV cards different?
EMV cards have a microprocessor chip on the card, which is usually golden in color and rounded square in shape. EMV cards cannot be swiped like the previously used magnetic strip cards. EMV contact cards have to be dipped inside a card reader at the payment terminal and EMV contactless cards have to be held near a payment terminal to process the payment.
What is Chip-and-PIN and Chip-and-Signature?
Chip-and-PIN and Chip-and-Signature are types of authentication methods required for EMV technology enabled credit or debit card payments to be processed. Chip-and-PIN requires the user to dip the card in the payment terminal slot and enter a PIN for a transaction to be processed. Chip-and-Signature requires the user to dip the card in the payment terminal slot and sign at the POS for a transaction to be processed. Using a PIN clearly offers a dual layer of security, but even the signature option is a marked improvement on the current magstripe version.
EMV’s evolution in the US and other major markets:
1984: A project began in France for testing the chip technology
1992: All point-of-sale devices and cards become chip-enabled in France
1993: Europay, MasterCard and Visa together founded EMV
2005: Visa and MasterCard liability shift begins in Europe
2006: Visa and MasterCard liability shift in Africa
2006: UK adopts EMV technology
2010: Visa liability shift in many Asian/Pacific countries
2010: First US payment card utilizing the EMV standard issued by United Nations Federal Credit Union (UNFCU)
2011: Wells Fargo, JPMorgan Chase, U.S. Bancorp announces migration to EMV for certain credit cards
2011-12: Visa, MasterCard, Discover, American Express announce PCI relief for early conversion to EMV (Merchant Incentives; Visa calls it Technology Innovation Program or TIP)
2013: Visa mandates US acquirers and processors to support merchant EMV chip acceptance
October 2015: Liability shift by Visa, MasterCard, American Express will take place in US
October 2017: Liability shift for fuel dispensers and ATMs by Visa, MasterCard, American Express will take place in US
EMV Migration in US:
Why chip-and-signature and not chip-and-PIN?
Card issuers in the US are expected to use Chip-and-Signature as the CVM (cardholder verification method). One of the reasons stated behind the US using this method is the cost. According to a FICO whitepaper, the cost to manage signature supporting cards is cheaper than the cost to manage PIN supporting cards. The reason chip-and-pin cards are primarily used in Europe is that when they adopted EMV technology in early 1990s, their telecommunications networks were not as robust as they are in the US today because of the high costs associated with the network infrastructure. However, the US has that kind of telecommunications network and it can adopt EMV technology with chip-and-signature at very low costs.
Not just fraud prevention
EMV migration in the US is taking place not only to prevent fraud but also to enable global acceptance of payment cards. In 2011, when banks like JP Morgan Chase and Wells Fargo announced chip cards or EMV cards, their primary motive was providing their customers with an advantage of a globally accepted card payment experience.
If you are a merchant, check out these myths about EMV that will easily guide you on next steps in this EMV migration happening in US: http://letstalkpayments.com/emv-myths-infographic/
Last but not the least, to sum it up, here are the 7 things you should know about EMV technology.