Processors are racing against time to convert PIN debit networks to EMV standards in the United States.
In fact, an EMV Migration Forum committee studying that aspect of the EMV transition has “the highest level of urgency” of any of the forum’s study groups.
Randy Vanderhoof, acting director for the EMV Migration Forum and president of the Smart Card Alliance, shared that assessment with ISO&Agent Weekly when highlighting details of the forum’s second meeting last week at Visa Inc. headquarters in Foster City, Calif.
The forum, created as a separate organization of the Smart Card Alliance, has “grown dramatically” since 17 organization members joined for the first meeting in September, Vanderhoof says. At last week’s meeting, about 200 people from 99 member organizations attended, he adds.
Vanderhoof cited the forum’s key issues and developments as it moves toward its next meeting, tentatively set for Feb. 4 in Salt Lake City around the same time as the Smart Card Alliance 2013 Payments Summit.
ISO&Agent: What makes the debit committee’s work so complex and pressing?
Vanderhoof: This committee is trying to find the solution for EMV migration with the Durbin amendment requirement of merchants having two options for debit networks for payment processing. The challenge lies in figuring out the technical solutions and components for the issuer in having an application from the card brand and two other applications for the merchant to choose from. The committee will discuss a common debit application and business relationships with the card brands to be able to route these transactions.
ISO&Agent: Can you provide an example?
Vanderhoof: It would be taking a card brand payment option, like Maestro from MasterCard, and routing it through the Star, Nice or Shazam networks.
ISO&Agent: Processors need to have those technical aspects figured out by the April, 2013 deadline for EMV acceptance, correct?
Vanderhoof: It’s a short timeline for processors because the mandate is on them to support EMV. The issuers and merchants face the liability hierarchy shift, but they are not being told they have to do it. But for processors, meeting that timeline is tied into the Durbin regulations, which did not factor in an EMV rollout in the U.S. The industry needs a certified and tested debit application for EMV running by the April, 2013 deadline.
ISO&Agent: Will the committee also study the chip-and-PIN versus chip-and-signature debate?
Vanderhoof: That debate ultimately has to be decided by the issuers and card brands. This committee is focused on the technical aspects of the debit applications.
ISO&Agent: What’s the mission of other EMV Migration Forum committees?
Vanderhoof: The communications and education committee is gathering input from industry stakeholders about the need for common terminology and educational programs where people can go to learn about EMV issues. They’ll develop FAQs and webinars to address topics as well. The testing and certification committee is developing testing requirements as defined by each card brand for EMV that will be placed on acquirers and terminal providers. There is a need for transparency and understanding the steps from each brand, and then aligning and coordinating that process.
ISO&Agent: Wouldn’t the Payment Card Industry Security Standards Council provide some of that?
Vanderhoof: PCI is more involved in where data is stored and keeping it secure in transport. The work of this EMV committee is about actual data specifications between cards, terminals and acquiring networks.
ISO&Agent: What does the forum’s U.S. coordination committee do?
Vanderhoof: That committee is discussing the prospects of defining a first phase of the EMV implementation in the U.S., on whether EMV could first be tested in a limited geography and a controlled environment before the industry moves too far down the path of rolling it out on a national scale. It would give issuers and processors a Phase 1 of testing in a limited scale to allow further analysis.
ISO&Agent: Would that take place in a single city or state?
Vanderhoof: The committee is getting input from the industry to try to define what is achievable. You want to scale up to a limited rollout and test all of the components, from how the cards being issued are being processed at the terminal, to the interoperability of the networks, and the consumer interfaces. There is no precedent in the U.S. for doing this, so we have to determine if it makes sense, while figuring out what a Phase 1 would include.
ISO&Agent: Independent ATM deployers have added their voices to the forum. What are their concerns?
Vanderhoof: The liability shift is coming in April, 2013 for the ATM operators as well, and they have to be able to process international EMV cards. This is a big infrastructure change for them and they are unclear about the technical requirements. The major ATM manufacturers like NCR and Diebold are well ahead on this curve, but the independent operators need to better understand what EMV conversion entails.
ISO&Agent: Will mobile commerce work with EMV?
Vanderhoof: Many of the U.S. card brands are working with mobile payment schemes such as Google Wallet and Isis, so they are prepared to provide EMV applications for those mobile wallets. They would be backward compatible for non-EMV if a merchant were not equipped to handle EMV. But this is not an issue at this point, and more merchants are including contactless technology at the point of sale when completing their EMV upgrades.
ISO&Agent: Are merchants leery of all this change?
Vanderhoof: Merchants are still unclear about the mobile payments roadmap. They want to be open to all methods, especially those that may lower their costs. But they want better clarity about what they should invest in today. A “future-proof” terminal will have more capabilities and an open architecture for downloading applications through IP connections. But they will come at a premium cost, and merchants will wonder whether they should pay for the Cadillac or go with the bare minimum until things become clearer.