Visa Inc. has introduced a series of incentives to spur the U.S. to adopt chip cards–a change once considered as likely as the country switching to the metric system.
The card brand will require processors to support chip transactions by April 1, 2013.
The U.S. has lagged behind in its adoption of the EMV Integrated Circuit Card Specifications, commonly called chip-and-PIN, which many countries use to improve security at the point of sale. Skeptics have said the U.S. banking system is too fractured to support a widespread shift to the standard and that the cost for merchants is too high to justify installing new terminals.
But Visa now says U.S. banks and merchants are ready to make the switch, and on Aug. 9 it set its first deadline just over a year away.
“Two years ago, over a third of the population [of bank card security experts] said that EMV would never get here,” says Julie Conroy McNelley, a senior risk and fraud analyst at Aite Group LLC. “I would have been one of [them].”
But this year, that percentage dropped to 17%, spurred by a number of events, she says.
For one, enough major banks have agreed to issue EMV cards to finally move the country toward widespread acceptance. This year, Wells Fargo & Co., JPMorgan Chase & Co., U.S. Bancorp and Citigroup Inc. have committed to issuing EMV-equipped cards, at least to travelers.
“We have seen so many factors change in the last two years,” McNelley says. “Visa wouldn’t have been able to push through an edict like this unless they had the majority of the issuers on board.”
Merchants also are more outspoken about wanting to use chip cards to combat fraud, she says.
By Visa’s October 2012 deadline, any merchant that accepts 75% of its annual Visa transactions through a terminal that can handle contact and contactless chip transactions will not have to validate compliance with the Payment Card Industry Data Security Standard.
“The costs [of PCI validation] can be significant,” says Eduardo Perez, the head of Visa’s global payments risk group. It costs some merchants $500,000 a year to perform the assessments, he says.
Visa also is trying to lay the groundwork for mobile-payments acceptance. The systems it is testing rely largely on the contactless payments infrastructure, and “we’re seeing a tremendous interest in mobile payments,” Perez says.
When upgrading terminals, adding chip acceptance can cost just $30 more a unit, he says. That does not include other infrastructure expenses, Perez says, but the point is that the validation waiver addresses the concerns merchants expressed over upgrade investments.
The waiver offer in the U.S. is an extension of the Technology Innovation Program, which Visa introduced in other countries in February.
The card brand will require processors to support chip transactions by April 1, 2013.
The U.S. has lagged behind in its adoption of the EMV Integrated Circuit Card Specifications, commonly called chip-and-PIN, which many countries use to improve security at the point of sale. Skeptics have said the U.S. banking system is too fractured to support a widespread shift to the standard and that the cost for merchants is too high to justify installing new terminals.
But Visa now says U.S. banks and merchants are ready to make the switch, and on Aug. 9 it set its first deadline just over a year away.
“Two years ago, over a third of the population [of bank card security experts] said that EMV would never get here,” says Julie Conroy McNelley, a senior risk and fraud analyst at Aite Group LLC. “I would have been one of [them].”
But this year, that percentage dropped to 17%, spurred by a number of events, she says.
For one, enough major banks have agreed to issue EMV cards to finally move the country toward widespread acceptance. This year, Wells Fargo & Co., JPMorgan Chase & Co., U.S. Bancorp and Citigroup Inc. have committed to issuing EMV-equipped cards, at least to travelers.
“We have seen so many factors change in the last two years,” McNelley says. “Visa wouldn’t have been able to push through an edict like this unless they had the majority of the issuers on board.”
Merchants also are more outspoken about wanting to use chip cards to combat fraud, she says.
By Visa’s October 2012 deadline, any merchant that accepts 75% of its annual Visa transactions through a terminal that can handle contact and contactless chip transactions will not have to validate compliance with the Payment Card Industry Data Security Standard.
“The costs [of PCI validation] can be significant,” says Eduardo Perez, the head of Visa’s global payments risk group. It costs some merchants $500,000 a year to perform the assessments, he says.
Visa also is trying to lay the groundwork for mobile-payments acceptance. The systems it is testing rely largely on the contactless payments infrastructure, and “we’re seeing a tremendous interest in mobile payments,” Perez says.
When upgrading terminals, adding chip acceptance can cost just $30 more a unit, he says. That does not include other infrastructure expenses, Perez says, but the point is that the validation waiver addresses the concerns merchants expressed over upgrade investments.
The waiver offer in the U.S. is an extension of the Technology Innovation Program, which Visa introduced in other countries in February.
