February 4, 2015
Recently, we had an opportunity to talk to Patty Walters from Vantiv, who is the Senior President of EMV Corporate Strategy at the company and is responsible for the design and management for EMV across Vantiv’s Merchant and Financial Institution businesses.
She has been a keynote speaker and popular moderator of the debate on EMV at the ETA Annual Expo, Smart Card Alliance Payments Summit, CARTES America and has been quoted by Yahoo Finance and Bloomberg.
She is a thought leader on EMV and payments and has 30 years of experience in various aspects of the industry, including payment security, terminal technology, and marketing. She draws on that experience to examine the impact and potential of EMV, discuss EMV strategies, and provide a snapshot of the future of EMV in the U.S.
Here are some excerpts from our conversation:
So we are in 2015, and EMV is the hot topic this year. What are your expectations?
Patty: We are 150 days away (at the time of the interview, nearing the end of January, 2015) from the liability shift that supermarkets, drug stores, department stores etc. would eventually have to face. As per regulations, merchants are required to migrate to EMV by October this year in order to avoid the liability shift.
Merchants and ISVs are largely not as ready as we hoped they would be. There seemed to be a general perception with many merchants that EMV implementation would be generally more like what they do today to certify for compliance, not realizing how very different EMV is when it comes to getting to the validation completion. That is not the case and they now realize it fully. It’s actually a complex process involving certifications and it takes time. This new learning is one of many surprises on the road to EMV. Does it make it look even more difficult for the road ahead? Maybe but those of us who are in it as a daily function would likely also tell you that we have come very far just to get here and that we have the right mix of people, expertise and leadership to make this happen long term. This is the country who either invented or operationalized early every payment improvement the rest of the world currently utilizes. Many of the payment CEOs and CFOs who are making EMV buying decisions are the same people who actually grew the American market to its current position over the last 25 years. What we should worry about more is the small merchant.
What should the SMB merchants be doing right now?
Patty: The liability shift will pose the highest risks for small merchants as they’ve not heard the EMV story except on CNN and may believe it is a worry for another day, as such, unless by happenstance or intention and have bought a new terminal recently, they’re starting from scratch; These merchants have not been working towards upgrading their payment systems. They are either completely unaware of the impact that the liability shift will bring or don’t understand what the liability shift is all about. It is absolutely critical that the industry develop a focus for how we reach and serve this particular segment of merchants. Acquirers are building campaigns and organizations like the EMF ( Smart Card Alliance EMV Migration forum) and the ETA are working alike to develop a message. Combining these centers of excellence will help but in the end, we are each responsible for helping the small merchant get the message from an experts. Small merchants like gift shops need to hear the message and have greater risk than carpet repairmen, we need to segment strategically to best reach critical mass with our bandwidth.
What role can awareness campaigns and education play?
Patty: Education, Education, Education. Tailored for merchant size and complexity, ISV, Acquirer, Card Processor, Independent Networks, issuer, terminal and core provider, card manufacturer and tool OEMs inclusive. The longer the focus, the better the documentation eventually but you take what you can get and figure out the rest thru strong strategic partnerships and working together to make it happen. It has largely been considered the American Way but in the United States, that’s how we roll and why we are so successful. One of the strategies could be to run aggressive campaigns to make merchants and consumers aware of what is coming up. One could hope for this in next year’s Super Bowl. In the meantime, acquirers and merchants can run specific training campaigns specific to the needs of the industry, including any of the stakeholders above, to assist in overall adoption, including making newer payment systems available to them so they can get practical hands-on experience in using them.
As EMV is such a large change, all stakeholders need to provide input into near-term and long-term strategies. This is an opportunity where retailers, for example, can look beyond compliance and ask, What do I want those terminals to do for the next 10 years? Do I want Mobile, Point to Point Encryption, Dynamic Currency Conversion, Tokenization, other changes that make me more profitable or secure (although I would suggest one is a factor of the other)? I would also suggest taking advantage of various industry forums to find out more about the issue — organizations such as the Smart Card Alliance, the Merchant Advisory Group, and the Electronic Transactions Association.
How has the response for EMV migration in the United States been like? Any statistics on adoption of EMV and NFC at the terminals that you would like to share?
Patty: I find some of the estimates by analysts at 40% of the terminals by the end of this year as very high. The reality on the ground is that it is still low, below estimates. The final specs came out in April, 2014 and the Independent software vendors (ISVs) underestimated the scope of the effort for the most part but I would say that you certainly can’t blame them. It’s a tough subject for most, given the nature of how we schedule innovation upgrades within the ecosystem when competing with business priorities driving revenue. Such is the culture of our ecosystem, it is the largest and oldest in the world and as such, has grown in to a rich tapestry of regulations, options, standard functions and networked systems over which is laid a complex standard that some say is more art than science. ISVs that haven’t joined the race yet might be too late. Conversely, some ISVs are nearly ready to come up with EMV solutions but overall a majority of them are nowhere near the stage where they can bring solutions in sync with any near term EMV enablement, let alone have their portfolio of merchants transitioned by October, hopefully each has at least their largest merchants complete, that is my biggest hope.
There’s a significant infrastructure upgrade that needs to happen, and there’s a significant amount of effort associated with applying all the new EMV rules. It does take time to learn about the possibilities and the best way to move forward. The certification process itself can also take some time, and you don’t want to find yourself unprepared and up against that liability shift deadline under informed.
What are your views on ‘Chip and PIN’ vs ‘Chip and Signature’?
Patty: Regulations are coming in from organizations like the U.S. House of Representatives Financial Services Committee, advocating the preference for PIN. Regarding the impact of the latest Durbin Amendment Act updates, any plan for EMV must be flexible to accommodate the nuances of how the EMV application selection process impacts debit routing choices. There is a 50:50 debit to credit ratio in this country. Most on the credit card side have a preference towards signature but this should change once the issuer’s customer gets comfortable with EMV and the issuer’s top of wallet consumer are abated.
Mobile wallet is a chicken and egg situation as we know. Has Apple Pay changed anything ?
Patty: Speaking of mobile wallets, Apple Pay is a platform that is showing impressive growth and clear signs of omnipresence. While the wave of NFC appears to be nearly a certainty and this is a positive improvement of the US market in the past year, it is by no means the only mobile technology that this country will support. We are large enough to offer many options of mobile wallets and experiences, this is the beginning of a new era in our country. The more horsepower pushed down at the consumer’s hands, the quicker the innovation. The 21st century of payments will see even greater change then the 20th and the newly laid infrastructure rails we are installing today.
Any special plans for this year?
Patty: Stay tuned; I am excited about improvements in the certification process and hope to talk with you more about this in the future!