The landscape for payment transactions is quickly evolving, and the financial industry is looking for a clear answer as to what is next. All fingers are pointing toward chip-based payment standards, also known as EMV smart cards. And many countries outside of the U.S. have already adopted the EMV standard. In fact, approximately 42 percent of all payment cards and 76 percent of all terminals worldwide now incorporate EMV smart card programs.
EMV smart card programs are paving the way for a safer, more secure payment transaction, as well as providing the necessary infrastructure to transition to mobile payments. As technology innovations continue, consumers are becoming more concerned about security, and this is where EMV plays a huge role in how transactions occur within the U.S.
Although there are still a lot of decisions that need to be finalized, payment brands – which include Visa and MasterCard – have decided to shift liability for fraudulent transactions to merchants or merchant’s acquirers if the merchant does not have a chip-enabled point-of-sale (POS) device. This liability shift will take place October 2015.
In order for this liability shift to work, there are many stakeholders that need to be ‘on-board’ for the EMV transition. If one party in the payment ecosystem is not EMV ready–such as an ATM or POS–the EMV standard will not be as effective. And inevitably, it will take consumers longer to fully embrace this technology.
Having a united front with EMV transactions is key, and what studies have found is that neither merchants nor financial institutions are completely aware or knowledgeable when it comes to EMV smart card programs.
According to Javelin Strategy & Research, 29% of merchants have “no knowledge” of EMV smart card programs and only 24% merchants have “limited knowledge”. Datacard Group recently conducted a study surveying a total of 181 financial institutions over a two month period. Out of the total institutions surveyed, 29.83% were small (assets under management $300M), 51.38% were mid-size (assets under management from $300M to $2B) and 18.78% were large (assets under management >$2B). Results showed that less than 2% of financial institutions were considered to be EMV ready.
The Time is Now
With the EMV liability shift quickly approaching, the financial industry needs to utilize as many tools and resources available so that they are equipped to make the best decision for their organization in regards to the EMV migration process. Luckily, with knowledge at your fingertips, there are many educational outlets available to companies interested in learning more about transitioning to EMV smart card programs. These educational resources include the following:
- Industry Expert Services: This is a cost-effective way to learn and inform key-plays in your organization through one-on-one educational training
- Webinars: Many companies offer virtual presentations that cover high-level aspects of EMV smart card programs
- Trade Shows: With EMV as a “hot-topic”, many trade shows have industry experts present their EMV insights during the conference
- Blog Posts: Key players in the financial industry are creating thought-leadership content to help educate the industry
Reasons to Consider Migrating to EMV Smart Card Programs
- The U.S. loses $5 billion a year to card fraud, accounting for about half of global card fraud despite only generating about a quarter of the total volume of purchases and cash
- This is due to the ease with which criminals can obtain credit and debit card account information from insecure magnetic stripe cards and create counterfeit cards
- As a result, the U.S. is quickly becoming a fraud target, as most of the rest of the world (80+ countries) has already made the move to chip-based payment cards
As you can see, it is crucial for all parties to be on the same page so that there is not a missing link with EMV smart card programs, and the U.S. can reduce the amount of fraud expected to occur in the coming years.