What is EMV?
Named for the original creators Europay, Mastercard and Visa, EMV is a technical standard developed to offer additional security to credit and debit cards by significantly reducing the opportunities for card payment fraud. EMV is widely used in Europe, Canada and Asia today, with the United States being the last major world economy to migrate to the EMV standard.
EMV has been gaining momentum for deployment in the U.S. given the recent credit card data breaches at major retailers. The need to both protect consumers’ sensitive information and avoid financial losses linked to card fraud is now at the forefront of issuers’, acquirers’ and merchants’ agendas.
Designed to make cards more expensive and complicated for thieves to duplicate, EMV-enabled cards help to reduce fraud for card-present transactions by utilizing a chip that stores the cardholder’s information and creates a unique encrypted code for each transaction that cannot be reused or replicated, reducing the value of stolen data. Another key differentiator of EMV cards is that consumers always keep the card in their possession. Instead of passing a card to a cashier for the payment, consumers instead interact directly with the EMV device and follow on-screen prompts to complete the transaction, with EMV chip cards prompting either for a PIN or a signature.
What Does EMV Mean for Merchants?
Although US merchants are not required to support EMV processing, there are advantages for those merchants who do. MasterCard, Visa, American Express and Discover announced a liability shift that will occur in October 2015, encouraging U.S. issuers and merchants to migrate from magnetic strip swipe technology to EMV payment technology. Currently, issuers incur the cost of card-present counterfeit fraud. For example, in a breach like the Target incident, banks take on the cost of reissuing new cards. However, after October 2015, the institution with the lesser technology (or the party that is the cause of an EMV transaction not being conducted) will be liable for the costs associated with card-present counterfeit fraud. Consequences for merchants come into play if a consumer uses a fraudulent card and the merchant does not have the technology to accept an EMV card.
However, the liability shift is not the entire story with EMV. 63% of consumers say that they would like to receive a chip card from their issuer within the next six months; and with 67% of debit issuers planning to offer EMV cards in 2015 and estimates of 70% of the credit cards to be EMV-enabled by next year, three merchants are starting to plan now on how to upgrade their systems and equipment to accept the U.S. EMV-ready cards that consumers will start carrying in their wallets.
In addition to the liability shift, the major benefit for merchants to accept EMV cards includes strengthened card-present security, with the elimination of card skimming and swiping. Acceptance of EMV can also attract foreign cardholders who are accustomed to EMV payment processing along with domestic cardholders who have the security of EMV enabled in their wallets, potentially driving incremental transaction volume and global appeal.
- Mastercard, May 2014 http://www.mastercard.us/_assets/docs/Final%20_consumer_attitudes_May%202014.pdf
- Digital Transactions, June 2014 http://www.digitaltransactions.net/news/story/Spurred-by-Fraud-and-Fear_-Debit-Card-Issuers-Cast-Aside-Their-EMV-Reservations-
- EE Times, June 2014 http://www.eetimes.com/document.asp?doc_id=1322710