How the U.S. Payment Industry Can Cut Through EMV Challenges with Education
With the October 2015 deadline for financial services providers (banks, credit unions, merchants, etc.) to fully implement EMV, many industry insiders are facing the challenge of adapting this new technology to the still-developing regulations. Overhead costs, implementation strategies and regulatory relations are all top of the list concern for executives. Further complicating matters is the lack of a centralized project management office to coordinate migration that other countries, including Europe, have the luxury to look to for guidance. As a result, U.S. providers are forced to deal with 18 regional debit networks that, due to the Durbin amendment, require each acquirer to route transactions via a minimum two competing networks – severely increasing the difficulty of the task.
Not to worry! As with any new product, service or process implementation the proper education and guidance will lead to the desired results, and luckily we can simply look across the pond for experienced help.
First, let’s start with a quick background.
EMV is the technology commonly used in the developed world, less the United States, that replaces the magnetic stripe in credit and debit cards with chip technology. The EMV chip technology reduces credit card fraud to make consumers transactions safer and also provides global interoperability. According to the U.S. Fed, the total number of unauthorized transactions (third-party fraud) in the United States during 2012 was an estimated 31.1 million, with a total transaction value of $6.1 billion; up nearly 10% from 2011. High profile security breaches are becoming far too common, such as the ones recently experienced at Target, Marriott, and Neiman Marcus. Discover Financial Services found that after the EU completed its migration to EMV, the region has seen an 80% reduction in credit card fraud while, comparatively, the U.S. has witnessed a 47% increase.
Changing industry regulations present additional challenges to implementing new payment processes and systems. A recent federal court ruling on debit regulations, while maintaining the current status quo, will affect the EMV migration in two key areas: merchants choice of debit transaction routings (required to choose a minimum of two competitors), and debit interchange fees. How these two issues are decided will affect how EMV processes will be implemented. It will be crucial for industry executives to keep an eye on this evolving process as we move forward.
There are many steps industry stakeholders can take now to help make the migration to EMV as seamless as possible. Developing key strategies for full migration is the first step in the process for many in the industry, but they often face a challenge of establishing effective strategies due to a general lack of knowledge of the process. Industry stakeholders must arm themselves with the appropriate educational services to help them formulate a strategic vision that is booth streamlined and profitable. While it may be unfortunate America is the last developed nation to migrate to EMV, it’s actually a benefit in the educational process as Europe and other countries have recently gone through this experience and can provide valuable information transfer.
Industry executives need not worry about the upcoming EMV migration deadline, but focus on implementing key strategies for their organizations. Lucky for them, they are not the first to go through this process and can look across the pond for valuable lessons that will lead to an easy and expedited transition. Once migration is completed, American consumers and businesses will be much safer with their financial transactions.
Gokhan Inonu is a global leader with over 25 years’ experience in EMV migration and financial transactions leadership roles. In his current position as President, Cardtek USA, Mr. Inonu heads the American division of Cardtek Group and oversees operations, sales, marketing and partner management.