EMV rollout among hottest topics at Money20/20

by Render Dahiya 0

This week payments professionals around the countryare descending upon Las Vegas to get the latest trends in the industry. Therollout of EMV chip cards continues to be a hot topic withthe likes of Javelin Strategy Research, Vesta Corporation and EMVCo deliveringsessions at Money20/20 on the state of the U.S. EMV rollout.

It’s been 12 months since payment-card fraud liability shiftedfrom card issuers to retailers, and in that time, the majority of EMV news hasbeen focused on the growing pains of transition, including slow certificationprocesses, low retailer adoption, the absence of PIN verification, andexaggerated consumer complaints about the inconvenience at point-of-sale.

Butissuers have continued to make progress in getting chip-enabled cards inconsumers’ hands, and Mercator Advisory Group, Visa andmany others have also reported positive indications that the roll out is makingprogress. And, to be fair, the Electronic Transactions Association reportedthat it was originally forecast that 100 percent U.S. adoption of EMV would take fiveyears, which is about how long it took European nations to getto the 50 percent mark.

According to Mercator, 3 in 5 Americans now own at least one EMV chip card, andthey expect that as many as 50 percent of credit card transactions will bechip-enabled yet this year. The American Banker Association (ABA) reports that more than 700 million chip cards have beenissued in the U.S., and believe it or not, the entire conversion isexpected to be done by year-end, 2018.

Whether issuers areon the fast track to replace 100 percent of mag-stripe cards, or haven’t yetbought in to the switch, there are three key factors that they should plan for:

Card Not Present fraud is just getting started. The transition has indeed driven adramatic reduction in point-of-sale fraud, as industry experts predicted. Infact, Visa says that card-based fraud is down 50 percent, while card-not-present (CNP) fraud is only up 12 percent,so far.

But that number is expected to grow exponentially,and more than out-weigh the point-of-salereductions. And as long as cards are still being produced with both mag stripeand chip functionality, fraud will continue to drive plenty of reissuance.

Why? Because criminals can actually turn off a section of code in the mag stripe(called a bit) that tells the card reader to require a chip transaction. Withoutthat key point-of-sale instruction, we’re back to square one with counterfeitcards.

What does all of this mean for issuers? In short, morereplacement cards. Issuers need to budget for and have a seamless productionplan that goes beyond the initial reissuance to manageongoing demand for EMV cards.

Mobile payments aren’t evolving fastenough to leapfrog EMV. There is no shortage of critics who say EMV is a solution thatshould’ve been retired before it even began in the U.S. But despite the manypredictions that a silver bullet is around the corner ready to tackle mobile,faster payments, security and ubiquity all at once, reality says otherwise and issuerscan’t afford to wait it out. EMV is far from perfect, but it will be the U.S.standard for the foreseeable and could serve as the basis for future security advances. Consider that creditand debit cards expire every two to three years, and you have a pretty goodidea of the impact.

Prepaid will go to EMV. Despite news reports to the contrary. Why? Because EMV for prepaid is moreaffordable and easier to implement than ever, a zero-liability policies on manyprepaid cards make them worth protecting at the point of sale. True, prepaidhas been last in line for EMV, but that’s starting to change.

General reloadable prepaid (GPR) cards have been some of thefirst to come online, as well as certain card types, like fleet cards, whichwill benefit from the 2017 liability shift for fuel station requirements toimplement EMV at point-of sale locations.

But the barrier to prepaid has also been reduced by theevolution of the card issuing process and it’s become so much easier forissuers to transition. EMV is and will continue to be complex, but what used totake 8-12 weeks takes as few as two weeks for issuers who use the latestmanufacturing technology, known as digital-on-demand.

This fast turnaround is driving a ten-fold increase in theamount of EMV cards being issued this year.

To back it up, Money20/20 presenters from NBPCA,Hidden Brain, American Express, i2c, and Urban FT noted that prepaid cards willcontinue to provide payment solutions for consumers, governments and businessesfor years to come. This is great news for card issuers transitioning from magstripe to EMV chip cards, especially those that adopt on-demand digital cardproduction and can deliver new EMV prepaid cards in a moment’s notice.

The productionbottleneck is a ‘manufactured’ problem. Many banks pushed for an accelerated EMVmigration to capture the full benefits of the liability shift and respond toconsumer demand for cards.

This created a capacity problem for many traditionalmanufacturing models that take weeks to get cards out the door. But issuersusing modern production technology are able to convert 25 to 30 percent fasterthan legacy systems can.

Using just-in-time production methods and on-demand technology allowsissuers to rapidly deploy first issue and reissued EMV cards without thebottleneck or the expense of holding chip card inventory.

Money20/20 stirred up a wealth ofconversation about EMV and its current state of the union. And EMV is a complextransition for any card issuer, but it’s getting easier as all of the players becomemore familiar with the technical requirements and practical market applications.Card production experts can give issuers the most flexibility to manage demand,costs, risk and future opportunity by leveraging the latest EMV on-demandtechnology.

Render Dahiya is CEO of ArroweyeSolutions, the only patented on-demand provider ofcredit, debit, prepaid and gift cards.

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