The US always likes to be first in in everything. While it has certainly fallen behind the rest of the world when it comes to card payments, the world’s biggest economy is poised to leap frog Europe right into EMV mobile payments. Billy Bambrough reports
Such is the speed of EMV trasition in the US that President Obama had to sign an executive order to speed the adoption of EMV-standard cards in the US in October. The transition to EMV — an acronym eponymous of Europay, MasterCard, and Visa, the companies that developed the standard — has been infuriatingly slow to gain traction in the US.
Go deeper with GlobalData
Lawmakers and credit card companies confirmed in February that the US would make the transition to EMV cards in October 2015. But over the past several months, big retail stores like Target and Home Depot, have sustained major hacks that caused the retailers to lose credit card information and personal information of millions of customers, giving new urgency to the call for more secure credit cards.
Speaking at the Consumer Financial Protection Bureau, President Obama said that the federal government would apply "chip-and-PIN technology to newly issued and existing government credit cards, as well as debit cards like Direct Express." The White House also said that all payment terminals at federal agencies will soon be able to accept embedded chip cards.
The case for EMV
While a move to EMV won’t stop fraud entirely (it would not have prevented the Target or Home Depot hack) it will still save a lot of money from banks general fraud bill. It’s not just Europe that has had success in with EMV.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataAccording to the Australian Payments Clearing Association (APCA): "Counterfeit and skimming fraud remained at AUS$37.2m in 2013, well down from its peak of AUS$66m in 2011. The use of chip technology is continuing to prove effective in countering this type of fraud."
A recent report from the APCA also highlights measures underway to help further reduce counterfeit/skimming fraud and lost and stolen fraud including the roll-out of chip on proprietary debit cards, chip-reading at ATMs and the phasing out of signatures in favour of PIN from August 2014.
Counterfeit and skimming fraud is now 33% below the level seen in 2008 reflecting the widespread use of chip in Australia. Large fraud events, such as the well-publicised data breach experienced in 2011, can interrupt the downward trend. In the long-term, however, as the number of chip-reading terminals in Australia and overseas increases, fraud is expected to drop further.
There has been resistance to the move to chip and pin in the US. Critics argue that card-not-present fraud sourced from stolen credit card details from places like Target and other well-known recent online card storage leaks will not be prevented, making the move less useful. The counter argument is to also introduce increased PCI compliance auditing and regulation.
Some consumer groups feel that there is a danger to customers through contactless transactions using EMV that they are not required to confirm. Although, with banks handling fraudulent purchases on a case but case basis and imposing purchase limits on contactless there is a lot being done to make sure customers money is secure.
There is a lot of work to do though, as researches at the University of Newcastle in the UK were recently able to put through an above limit contactless card transaction by putting the transaction though as foreign currency. This made them able to make a contactless transaction of 999,999.99 in any currency other than Pound Sterling.
The US has its work cut out
Figures released by the global industry body EMVCo show that nearly 30% of all card-present transactions conducted globally between July 2013 and June 2014 used EMV chip technology.
The data represents all EMV chip card-present transactions – both contact and contactless – as processed by EMVCo’s members, American Express, Discover, JCB, MasterCard, UnionPay and Visa.
While what EMVco describes as Europe Zone 1 (predominantly western and northern Europe) has the highest percentage of EMV chip transactions accounting for over 96% of card-present payments.
This is followed by Canada, Latin America and the Caribbean, where collectively over 83% of card-present transactions are EMV chip-enabled, and Africa and the Middle East which has an EMV chip transaction volume of nearly 76%.
Europe Zone 2 and Asia are two regions which are in the process of adopting EMV chip technology and had transaction volumes of over 50% and 19% respectively.
The US, though comes in last place by a long way with EMV making up just 0.03% of its card transactions.
This is changing though according to a recent survey from the Payments Security Task Force (PST).
The survey, made up of answers from First Data, Bank of America Merchant Services, Citi, Chase Paymentech, Vantiv, Elavon, Wells Fargo and Global Payments, shows that that at least 47% of US POS terminals will be enabled for EMV chip technology by the end of 2015.
The estimates are based on forecasts provided by acquirers representing approximately 47% of US merchant terminals will be enabled for EMV chip technology by the end of 2015, making up 80% of US purchase volume. Times are a’changin’.
