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EMV – the Silent Migration
Posted November 7, 2013

“The EMV migration is happening, but very silently. The issuers seem all to be prepared for it and are planning to issue chip cards next year, and some have already started.”

I’ve come to realise that the EMV migration in the US is a silent one, happening slowly but surely in the background without much apparent interest from local players. All the talk, “hype” and interest is not the EMV migration but in mobile payments, i.e. in ways to circumvent card payments and instead of making them more secure.

I have been following the EMV migration process in the US closely for the past three years, because as an EMV platform provider my company, Handpoint, can stand to benefit greatly from opportunities associated with it. I have therefore attended and presented at various US payment conferences for the past three years and I could summarise my year-by-year findings as are:

2011 it was early days for EMV, there was very limited interest and I was basically explaining the technology to other attendees. And there was another three letter acronym that held centre stage – NFC.

2012 the FIs and payment players were very much aware of EMV but showed very little interest and there was much talk about the US leapfrogging EMV completely, to something supposedly much better like Google Wallet or ISIS. Yet, at the same time the teams at Google Wallet and ISIS were quietly saying that they were relying on the EMV migration in order for their wallets to kick-off – as they said EMV migration would push NFC readers in the stores – a catch 22, anyone!

This year, 2013, I attended/spoke at Money2020 in Las Vegas and it was in many ways more of the same. ISIS and Google were pushing their wallets rather then trying to explain why NFC hadn‘t taken off or why it would or should. PayPal announced some new payment methods at the conference, i.e. the Payment Code, which is basically either a QR code checkout method or a Pay-with-PIN at an existing payment terminal – putting emphasis on payment methods that would fit in the current merchant environment as opposed to needing a HW modification/replacement. All very interesting although PayPal seems to have missed the fact that barcode scanners used by most merchants can‘t really scan QR codes of mobile phones and terminals tend not to be updated (needed for their payment code) unless they are replaced – EMV, anyone?

Basically, there doesn’t appear to be any interest at all in the EMV migration and I continue to be the only speaker on the subject while the excitement is all around ways to pay after it is been implemented – so to speak. But lurking in the background and whispered in back rooms at this year’s conference, was a more exciting news (to me at least).
All the new terminals are EMV capable

The EMV migration is happening, but very silently. The issuers seem all to be prepared for it and are planning to issue chip cards next year, and some have already started. And the terminals are being deployed as all the new Ingenico’s and Verifone’s have that are deployed are EMV capable – although the EMV functionality is turned off and Ingenico/Verifone will undoubtedly charge a shilling or two to turn it on.

Some analysts reckon that up to 10% of terminals in the field US are EMV capable. So why is there so little talk or interest in the EMV migration, the biggest overhaul in US payment history?

I don’t really have a good answer to that question and one would think there was more talk on the subject as there is much business associated with it. Perhaps it is because most of the local market players stand to benefit very little from the migration, as they’ve got nothing to add to the more than a decade old technology. Perhaps it is because of the very little interest from the merchant side, which have only been offered a stick in the form of a liability shift in October 2015, but no carrot in the form of a lower interchange, as the card schemes have offered globally (some baby carrots have been offered in the form of PCI audit reliefs).

The Durbin amendment and its appeal by the Fed is undoubtedly having a delaying effect on the whole EMV migration and an outcome before the end of the year is likely kick-start EMV card issuing. Also, I wouldn’t be surprised to see the card schemes offering some carrots in the form of a lower interchange at the same time (or perhaps, a higher interchange of magnetic stripe payments).
Fraud is mounting in the US

EMV might not offer US merchants or cardholders any excitement or groundbreaking technology other than security. But fraud is mounting and has increased by 70% since 2004 in the US, which now stands for almost quarter of the global card volume and almost half the global fraud. While at the same time fraud associated with counterfeit and stolen cards (the fraud that EMV tackles) have reduced by 80% in the UK for the same period (EMV was introduced 1st of January 2005). Fraud in the US is likely to increase even further this year and next year as the US market remains as one of the few havens for mag-stripe fraudsters. So I look forward to next year’s payment conference in the US – perhaps then I won’t be the only speaker on the subject of EMV.
Blog post by David Gudjonsson Handpoint CEO & Co-founder

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