EMV in the U.S.: Security, Challenges, and Benefits

EMV: Security and Interoperability:

  • EMV is the global standard for credit and debit card paymens and is named after its original developers: Europay, MasterCard, and Visa. EMV cards feature an embedded microprocessor chip that stores and protects encrypted account user data. EMV payment terminals authentication transactions with a cryptographic message that makes each transaction unique. This authentication technique is called dynamic authentication, and provides a higher level of security compared with the magnetic stripe technology that most U.S. credit and debit cards currently employ. EMV has been proven to reduce the type of fraud where customer account information is copied from a card's magnetic stripe and then transferred to a blank / dummy card for fraudulent purchases.
  • In addition to better security, adoption of the EMV standard would create more card payment interoperability among countries. EMV is the standard in most countries outside of the U.S. More and more, U.S. travellers need EMV enabled cards in order to make payments at the point-of-sale abroad. Some U.S. banks have already started issuing EMV-based cards to their cardholders who travel internationally.

EMV: Adoption Challenges:

  • EMV adoption has been proven to reduce POS fraud, but in Europe other types of fraud have risen in its place. U.S. banks will largely be able to leverage their existing payments infrastructures, but will need evaluate and adjust their present security measures in order to prepare for new types of fraud, both card present, and card not present. EMV enabled cards remain as susceptible to card not present fraud tactics as magnetic stripe cards.
  • The U.S. Card Associations must develop a unified approach to EMV adoption and provide nationwide standards and a deadline for conversion of all nonstandard terminals to EMV.
  • The biggest challenge to EMV terminal adoption will be smaller merchants who might go 5-10 years between replacing terminals.
  • Another, possibly even bigger challenge, to EMV adoption than mass terminal replacement will be connecting EMV to all the loyalty, discount, and incentive programs currently communicating via magnetic stripe. This loyalty infrastructure will be a major incentive that will help drive EMV acceptance among cardholders.

EMV: Benefits of Complementary Payment Solutions

  • Since EMV and NFC-enabled mobile payments easily complement each other, new EMV terminals will most likely be able to accept Near Field Communications transactions from mobile devices, smartphones, and electronic wallets. Merchants could have one payment terminal for multiple forms of payment.