EMV and the Cost of Implementation (or the Cost of Not)

by David Fish 0

There are certainly a lot of cost concerns onboth the issuing side of the payment card space as well as theacceptance side. My colleagues and I here at Mercator AdvisoryGroup have been working on discerning what the hard costs andbenefits are for both issuers and merchants, since the quantifiablecost is the most tangible element of the business decisionsinvolved in weighing whether or not to upgrade either terminals orplastics. However, with EMV migration, not all the benefits arequantifiable.

For instance, a merchant that we advised recently asked me for thestatistics associated with counterfeit fraud so they could weighhow much potential savings they achieve upgrading terminals. Iimmediately knew-while he had a good point and a valid questionstemming from it-there were several dynamics factoring into theconsideration to upgrade that he wasn’t taking into account, andthat cannot be taken into account in ANY hard cost/benefit analysisfor EMV.

In fact, I’d go so far to say that most of the good reasons toupgrade terminals on the merchant side and plastic cards on theissuing side have nothing to do with the elimination of counterfeitfraud losses. Since I am less a “math guy” and more of “marketforces guy” in my analysis of these kinds of questions, many of youprobably guessed that I would say this: fraud loss cost reductionis not the reason to migrate to EMV.

We also don’t have the need for offline authorization thatprecipitated the development and implementation of EMV in France in1992. Only when we as an industry are able to leverage the chip onour new plastics in some kind of fashion that adds value to basicauthentication (though it is certainly a better authenticationtechnique than magstripe), will we be able to make a compellingbusiness case for EMV beyond mandate compliance.