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Whileno mandate exists that requires banks to issue EMV chip cards, the debate forthe U.S. market adoption of EMV has largely ended. This is due, in large part,to the increasing frequency of large merchant data breaches of storedmag-stripe card data and the subsequent fraud losses that follow them, as wellas the approaching fraud liability shift dates set by the various cardassociations and networks.
Forissuers that are considering issuing EMV chip cards, the implications aresignificant in terms of the complexities, timing and costs of implementation.
EMV Issuance inthe U.S.
EMVchip cards use sophisticated technology that features many different optionsand configuration profiles. Several of these options were developed to supportoffline functionality, in which the chip on the card performs various functions that, in the U.S., would be theresponsibility of the issuer’s online authentication system to conduct. Withoutthe need to enable offline functionality, EMV deployment from an options and profileperspective narrows fundamentally to one decision: to include contactlessinterface with each card or not.
EMV CardInterface Options
EMVchip cards are typically deployed in one of two forms: contact only or dualinterface. With contact-only cards, the metallic area on the front of the cardis its contact plate. A microprocessor chip is embedded directly behind thecontact plate. With an EMV contact transaction, the card is inserted into acard acceptance device (e.g., a payment terminal). The card reader mustmaintain physical contact with the plate and chip for the duration of thetransaction. This connection enables the chip to get power from, and exchangedata with, the terminal. This is often referred to as “dip” to pay.
Dual-interfacecards include both the contact interface and the contactless interface.Contactless EMV works by holding a contactless chip-enabled card, which alsocontains an integrated antenna that’s placed in the border of the card, withinproximity of a contactless-capable EMV reader. The reader wirelessly powers thechip embedded in the card and allows exchange of data via near fieldcommunication, or NFC. This is often referred to as “tap” to pay, because thecard never has to leave the customer’s possession.
Contact-onlyEMV cards are the most common form of EMV implementation, due in large part tocosts with issuing the more expense dual-interface cards and the lack ofNFC-enabled terminals.
Afteryour bank’s card program has been upgraded to begin issuing EMV cards, thereare several approaches to consider when rolling them out to your existing cardbase.
Oneapproach is to reissue the entire existing card base at one time. However, thisapproach results in fairly significant upfront costs, as well as a steeperlearning curve for consumers and branch staff alike, which slows the overallexperience of working with EMV transaction data.
Thegenerally accepted industry approach is to upgrade your existing card base ascards expire. Spreading the costs out, while both building on EMV experiencesand working to educate cardholders on its use, allows banks to take a moresystematic, successful approach to EMV migration. Additionally, with thisapproach, banks can still target specific customer segments that would beinclined toward EMV-enabled cards.
Forexample, consumers who frequently travel internationally will increasingly bechallenged when attempting to use a non-EMV debit card, as most of the rest ofthe world has already adopted EMV. In order to continue to support these valuedclients, the bank can preemptively identify these travelers and reissue/upgradetheir existing cards to include EMV chip functionality.
Asyou weigh the pros and cons on issuing EMV cards, consider not only theoperational costs, but also the reputational benefits that may come fromcustomers who recognize EMV as the more secure card option. These customerswill likely reach for their EMV-enabled card more often than their non-EMVcards, even if they are using them at terminals not yet equipped for EMVtechnology.
Derrick Bretz is director ofproduct management for CSI Payment Services, a role in which he leads strategic product developmentand quality improvement initiatives. Derrick’s work enhances payment andcommerce experiences and customer education through the use of data analytics.