Card Payments Roadmap in the U.S.: How Will EMV Impact the Future Payments Infrastructure?

Publication Date: February 2011

• Click here to download the white paper

The EMV specification defines technical requirements for bank cards with embedded microchips and for the accompanying point-of-sale (POS) infrastructure. With few exceptions (primarily in the United States), financial institutions worldwide issue EMV bank cards to businesses and consumers. According to EMVCo, approximately 1 billion EMV cards have been issued globally and 15.4 million POS terminals accept EMV cards. The primary purposes of including a chip in a bank card are to store cardholder data securely, protect data stored on the chip against unauthorized modification, and reduce the number of fraudulent transactions resulting from counterfeit, lost, and stolen cards.

The United States did not choose to implement EMV while Europe, Canada, Latin America, and Asia are in various stages of EMV chip migration. The U.S. has historically had relatively low fraud rates, due to nearly 100 percent online authorization and sophisticated real-time fraud detection by the issuer authorization systems. In addition, substantial costs are associated with the deployment of an EMV infrastructure. Chip cards are more expensive than magnetic stripe cards, POS terminals require additional features to read the card, and legacy back-office systems must be upgraded. Without a perceived fraud problem and given the cost of implementation, U.S. financial institutions and merchants did not make the investment required to convert the legacy bank card issuance and acceptance infrastructure to the EMV standard.

Today, however, several factors are driving the U.S. payments industry to reconsider implementation and deployment of EMV for payments. Most important are the increasing amount of card-related fraud losses and the cost of enhancing security features incrementally. In addition, the investment being made by merchants to comply with the Payment Card Industry Data Security Standard (PCI DSS) and by the industry to implement new capabilities for contactless and NFC mobile payment transactions provides an opportunity to move to EMV in the U.S. Moreover, U.S. travelers abroad are discovering that their magnetic stripe bank cards are sometimes rejected. Finally, as other markets have adopted chip cards, the per-unit costs for cards and devices have decreased. Some POS device manufacturers now sell only hybrid devices with both chip and magnetic stripe capabilities.

U.S. payments industry stakeholders recognize that there is a need to educate themselves about EMV and to leverage the lessons learned in other parts of the world. When compared to other regions, the U.S. market has unique characteristics, such as low cost telecommunications and the presence of contactless chip cards. Industry stakeholders are exploring which implementation options in the EMV specification will be required to meet U.S. market needs in the most cost-effective manner.

The objective of this white paper is to educate stakeholders across the payments value chain on different options for EMV implementation and critical considerations for deploying an EMV solution in their business environments in the U.S. The primary stakeholders are issuers, merchants, acquirers/processors, ATM owners and suppliers of hardware, software, and support services. White paper topics discussed include:

• The impact of the global deployment of EMV on possible roadmap options for the U.S.
• A primer on EMV security specifications for card authentication methods, cardholder verification methods and transaction authorization approaches and implementation options for each.
• The relationship between EMV, contactless payments and Near Field Communication (NFC).
• The changes required in the issuing, acquiring/processing, merchant and ATM payments infrastructure to support the different EMV roadmap options.

About the White Paper

The Smart Card Alliance Payments Council developed this white paper to educate stakeholders across the payments value chain about the critical aspects of deploying an EMV solution in their business environments in the U.S.

Payments Council members involved in the development of this white paper included: Accenture LLP; American Express; Apriva; Booz Allen Hamilton; Capgemini; Capital One; CPI Card Group; Datacard Group; Discover Financial Services; epay North America; First Data Corporation; Fiserv; Gemalto; Giesecke & Devrient; Heartland Payment Systems; HID Global; IBM; JPMorgan Chase; LTK Engineering Services; MasterCard Worldwide; NagraID Security; Oberthur Technologies; Smartcard Marketing Solutions; Thales e-Security; Visa, Inc.; ViVOtech; Watchdata Technologies.

About the Smart Card Alliance Payments Council

The Smart Card Alliance Payments Council focuses on facilitating the adoption of chip-enabled payments and payment applications in the U.S. through education programs for consumers, merchants, issuers, acquirers/processors, government regulators, mobile telecommunications providers and payments service providers. The group is bringing together payments industry stakeholders, including payments industry leaders, merchants and suppliers, and is working on projects related to implementing EMV, contactless payments, NFC-enabled payments and applications, mobile payments, and chip-enabled e-commerce. The Council’s primary goal is to inform and educate the market about the value of chip-enabled payments in improving the security of the payments infrastructure and in enhancing the value of payments and payment-related applications for industry stakeholders. Council participation is open to any Smart Card Alliance member who wishes to contribute to the Council projects.