The EMV 101 series provides go-to-resources for those who are interested in learning more about EMV payment technology and EMV migration in the U.S. This is the fourth entry to this series that outlines the timeline for the U.S. EMV migration. As we progress through the series, we will go more in-depth on the EMV technologies and applications that are important for a successful program roll out.
Across the globe, there continues to be a push for more secure payment technology. EMV has proven to be an effective technology to reduce fraud for card-present transactions, forcing fraud to migrate to areas that have not adopted a chip-based payment system. After years of push back due to the significant deployment cost, the U.S. issuers are working diligently to roll out EMV as the October 2015 liability shift approaches. As migration begins to take shape in the US, it’s important to take a look at how other large economies made the shift, and compare how different migration patterns and policies have affected fraud rates around the world.
- France was the first large economy to embrace smart card technology. France’s banks began issuing chip-embedded cards in 1986; and in 1992, the national card program (“Carte Bleue”) also began issuing smart chip cards and introduced the more secure chip-and-PIN requirement in 2003. Card-present fraud losses immediately decreased, though card-not-present (CNP) losses rose as fraud migrated to online channels.
- United Kingdom was another early adopter of EMV technology. The migration effort was branded as “Chip and PIN,” with the now famous “I (heart) PIN” campaign to educate consumers to the benefit of using this more secure payment technology. The UK reached a 99.8% complete migration in 2006. Since the EMV rollout, card-present loss stayed low, but CNP loss increased.
- Australia took a gradual approach. Similar to the U.S., Australia has suffered a disproportionate share of global fraud. Migration to EMV, with signature verification, took place in 2012 and 2013. Australia’s gradual movement has hindered the type of immediate positive results seen in other countries, however. Card-present fraud is slightly down, but CNP fraud has surged.
- Canada implemented a smart card pilot program in 2007 in Ontario, which offered many important insights before the rollout of the full smart card program. The lessons learned from the pilot program are one of the reasons Canada’s migration has gone more quickly and smoothly compared to other countries. They have seen very strong results in reducing card-present fraud losses. In March 2013, fraud loss from skimming was at its lowest since 2003. But like other migrated nations, Canada has also seen an increase in CNP fraud.
These individual use cases offer several lessons in the global migration process to EMV adoption. One consistent trend has been a decrease in card-present fraud, followed by an increase in CNP fraud and fraud export to non-chip based countries. As U.S. issuers are pushing to meet the liability shift deadline, it is important to look beyond the technology. What we have learned from many of the global migrations is that it is not easy to change consumer behavior. Education becomes a key element to ensuring consumer adoption. Otherwise, consumers will quickly default to the “swipe” of the mag stripe to complete their transaction.
Issuers and merchants alike need to work together to ensure both the consumer and the cashier both know about the technology, how to use it, and if possible, why it is important. Soon we will all have EMV enabled chips on our payment cards. But, if we are going to see these used in a way that has any impact on fraud, we all need to do our part to educate those around us.