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Why More Banks Are Moving Toward EMV Adoption

American Express is the latest -- and last -- of the three major card companies to issue a road map for EMV adoption in the United States. Is the switch to chip and PIN now inevitable?

The push for EMV adoption in the United States continues to gain steam, but how long it will take for the card standard used in the rest of the world to become the dominant payments platform here is anyone's guess. EMV, the global technology standard for credit and debit card payments named after its original developers (Europay, MasterCard and Visa), features cards with embedded microprocessor chips that store and protect encrypted account user data, in contrast to the magnetic strip cards now used mostly in the U.S.

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In the past year, there has been a flurry of announcements by major card companies and banks touting plans to bring EMV to the United States. New York-based American Express, which announced its road map for EMV adoption in the U.S. in June, was the last of the three major U.S. card schemes to detail its plans. The company said it "will work alongside other industry participants to drive interoperability across the U.S. and other countries and support chip-based technology" for payments transactions.

One factor that favors EMV adoption is the stronger security the standard offers compared to mag-stripe cards, says Steve Ledford, a partner in Chicago with consulting firm Novantas. Ledford adds that there are certain types of fraud that EMV can help prevent, such as those focused on counterfeiting. "Skimming is also something much more difficult to do [on an EMV card]," he says. "It's easier to compromise a magnetic stripe -- the data is there for anyone who wants to skim it." But, Ledford is quick to add, EMV cards won't help deter other types of fraud, including online fraud.

The Last Frontier

While Ledford acknowledges that EMV likely will become the standard in the U.S., he says it won't occur as quickly as the card companies suggest. The switch to EMV, Ledford notes, will be "a big cost" to issuers and merchants, which will have to install EMV-enabled terminals.

Of course, Ledford adds, that is not a huge obstacle, since merchants deal with regular replacement cycles of their POS terminals anyway. "There's a certain level of inevitability to EMV, but still a question of how fast you get there," he says. "We can't stand alone forever."

[Bank of America Switches to EMV Chip Credit Cards for Consumers.]

According to the release announcing its road map, American Express is targeting April 2013 as the date by which processors must be able to support American Express EMV chip-based contact, contactless and mobile transactions. Beginning October 2013 merchants will be eligible to receive relief from PCI Data Security Standard (DSS) reporting requirements if the merchants' point-of-sale (POS) acceptance locations -- where at least 75 percent of their transactions occur -- are enabled to process the EMV transactions, the company said.

Purchase, N.Y.-based MasterCard announced in May the formation of a cross-industry group designed to foster collaboration and alignment among networks, issuers, merchants, acquirers, processors, terminal manufacturers, card manufacturers and other groups in the implementation of EMV technology in the U.S. San Francisco-based Visa, which said it already had shipped 1 million EMV cards in the U.S. as of Dec. 31, 2011, announced its EMV road map for the U.S. last August.

Meanwhile, several U.S. banks, including Bank of America, Wells Fargo, U.S. Bank and JPMorgan Chase, already have begun issuing EMV cards to select customers who travel internationally. Chase, through its payment-processing and merchant-acquiring subsidiary Paymentech, also announced that it is rolling out an EMV-enabled terminal. According to Chase, merchants that accept EMV-chip cards with the "Future Proof" terminal, which supports both signature- and PIN-based EMV transactions, can expect fewer chargebacks and may have no liability in the future for the cost of card fraud.

Bryan Yurcan is associate editor for Bank Systems and Technology. He has worked in various editorial capacities for newspapers and magazines for the past 8 years. After beginning his career as a municipal and courts reporter for daily newspapers in upstate New York, Bryan has ... View Full Bio

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