Any EMV detractors saying the two-decade-old security against counterfeit cards has long passed its time are likely not aware of what the future has in store for the chip-based technology.

Because EMV technology has been available since the mid-1990s and adopted by most countries around the globe, the U.S. has been considered a "late bloomer" in finally establishing its migration away from mag-stripe cards.

"From the point of view of the U.S. just now adopting EMV, one could argue the technology is obsolete," said Maarten Bron, director of innovations at Underwriters Laboratories. "However, when looking at the developments taking place, we are no longer talking about different form factors for plastic cards, we are talking about different form factors for EMV."

UL entered payment security technology in January of 2012 with more than 100 years of experience in testing physical products for safety, becoming an EMV certifier to help accelerate the process to chip-based cards for U.S. merchants.

Late last year UL emphasized tokenization as a key security layer to complement the use of chip cards, but the combination of the two in one technology will be the way of the future, Bron added.

"As long as we have a token and cryptogram we can do any kind of commerce through any kind of carrier through any channel," Bron said. "You actually have a very future-proof way of looking at the concept of payments."

Tokenization replaces payment card data with a set of unique characters, or a token, when the data is being stored for future or recurring use. Generally, security experts recommend end-to-end encryption of data when it is moving along payments rails and tokenization when data is at rest. Both complement the chip in EMV cards, which creates dynamic data unique to a single transaction, rather than using the static card data that is easily exposed on magnetic-stripe cards.

It makes "perfect sense" to envision EMV and tokenization working hand-in-hand in an even more powerful manner in the future, based on what the EMVCo standards body is working on, said Julie Conroy, research director and fraud expert with Boston-based Aite Group.

"We don't have tokenization officially baked into the EMV specifications yet, but I know something is in the works," Conroy said.

It won't be long before EMV, tokenization and encryption is taken from the card or mobile device and extended into other channels and payment methods, Conroy added.

"We can use this knowledge for online banking and mobile banking," Conroy said. "It's still a little bit 'out there' and it is not going to happen next year, but that absolutely is the vision."

Development of security in other channels through EMV technology is based on the premise that EMV at the point of sale to deter counterfeit fraud is the essential first step and foundation for its further use, Bron said. To not have it at the physical point of sale is too much of a security risk, he added.

"Regardless of what comes up in the future with payments wearables or other form factors, if you develop your notion around payments that have a cryptogram and a token, you can actually do anything in a secure fashion in a robust network," Bron said.

Future EMV payment security also helps banks as they continue to position themselves as more of a distribution channel for innovators, rather than being the innovators themselves, Bron said.

Many banks have lined up behind Apple Pay, which uses card brand EMV payments rails and tokenization, and the just-released Android Pay. "Rather than talking about who wins, the industry finally appears to be seeing that there is something in it for everyone, and that's a nice place to be," Bron said.

Still, some disruptors, such as Kash and the Merchant Customer Exchange, continue to seek ways to get around the fees and fraud associated with payment cards and dated legacy banking systems and networks.

Others, like Dwolla, are working with current systems and seeking ways to improve them with software applications that add needed services.

Those disruptors will find a niche or a place in the payments ecosystem, quite likely by creating a technology that will evolve into a much-needed service in the future, Bron said.

"The beautiful thing about innovation is that there is not really a direct need that gets addressed first," Bron said. "Henry Ford once said if he invented what people wanted, he would have invented a faster horse. Instead, he invented a car."

In the same way, Apple has expanded the use and need of its iPhones since its early days, and the same may come about with disruptors establishing systems that are entirely different from current payments networks, Bron added.

He pointed to the development of a blockchain for Bitcoin as a technology that banks may ultimately adopt to upgrade banking systems.

EMV started in much the same manner with a single intention at the point of sale, but the technology has an extended shelf life ahead in forms we haven't even envisioned yet, Bron said.

 

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