Jamie Topolski, the new director of alternative payment strategies for the Output Solutions division of Fiserv, expects that the U.S. migration to EMV will take as many as 10 years to complete.
Topolski comes to the bank technology vendor with many years of experience in banking technology and EMV conversions. EMV-chip cards improve security over magnetic-stripe cards, and are commonly called "chip and PIN" cards because they are typically paired with a PIN as a further security measure. In the U.S., many issuers are keeping with the practice of using a PIN, but others are choosing to offer "chip and signature" cards instead.
Topolski spoke to PaymentsSource about different aspects of the U.S. conversion to EMV with the looming October 2015 timeline set by the card networks, after which most companies handling card payments will face a shift in fraud liability if they are not able to accept EMV payments.
This interview has been edited for length and clarity.
PaymentsSource: The number we hear fairly often about how long a migration will take is three to five years after the liability shift. Do you think the U.S. process will take that long?
Topolski: Actually, I think it is going to be an eight to ten-year process. Canada had a pilot program for years that was nationally coordinated before [its 2010 deadline], and that's a country with a small number of large banks and acquirers. Nevertheless, they are still implementing. It's just a long process.
PaymentsSource: What will delay those in the industry from being EMV ready by the October 2015 date and beyond?
Topolski: On both the acquiring and issuing side, there are some significant challenges. Just the sheer number of acquirers and value-added resellers out there that have to be involved is an issue. ATM owners have been very focused on their migration away from Windows XP, so they haven't had as much time to focus on EMV. On the issuing side, we have so many banks and credit unions in the U.S. Some of those banks have multiple BINs (bank identification numbers) and, to be honest, each one of those BINs equates to an EMV project.
PaymentsSource: Any success stories at all at this point?
Topolski: At some Walmart locations, we are seeing some EMV ready terminals being turned on. But overall, very few EMV capable terminals out there have been turned on. We are seeing more EMV terminals deployed, so hopefully some of the larger chains will be ready to turn those on in 2015.
PaymentsSource: What facet of the EMV migration do you believe could surprise the U.S. industry as something that was overlooked?
Topolski: I do think the education piece for merchants and consumers is going to have to happen, but it's a question of who does it, or how many different entities will do it. The EMV Migration Forum is trying to provide educational materials and is doing a very good job of developing documentation, but it's not the same as having a national payments type of council overseeing it, like they have had in other countries for this migration.
PaymentsSource: What happens if the education aspect falls short?
Topolski: There will be confusion at the point of sale when consumers first start using their cards with the chips. The cards will work in some locations and not others, and the consumers won't know whether to swipe or insert the card. There are so many instances in which we insert our card and remove it quickly. We have to convey to cardholders that they are going to insert the card and leave it there until the transaction is complete.
PaymentsSource: What about chip and PIN vs. chip and signature and the effect on consumer habits?
Topolski: There will be some inconsistencies. Some issuers are choosing to support chip and PIN while others support chip and signature. It won't be clear right away.
PaymentsSource: What would be an effective education message or method?
Topolski: What we are recommending to the banks is that education is extremely important. Those of us in the industry just take for granted that consumers will understand because we are so used to the terminology and the form factor and the interaction of an EMV card with the terminal. We just assume consumers will pick it up very quickly. They won't.
PaymentsSource: Is there any reason for us to fear keeping the magnetic stripe on the EMV cards? Some would say that defeats the purpose of chip technology.
Topolski: Mag-stripe is going to be around for quite some time. If nothing else, the presence of a mag stripe opens the door on the ATM, which detects that magnetic device and sucks in your card, if you will. It doesn't need to have any pertinent data on it.
But in working together with the chip, there will be a different code on the mag stripe that lets the terminal know that this card has a chip on it and should be used with the chip, not the mag stripe. If someone goes to an old terminal, it doesn't care about chip code and will do the transaction with mag stripe. But if it is a stolen card being used at an EMV terminal, the terminal will prompt the merchant to go to the EMV chip. If the transaction is somehow pushed through as a swipe transaction, the (point of sale) alerts this may be a fraudulent transaction or stolen card. So the potential impact can be reduced.
PaymentsSource: Do you think most issuers, acquirers and merchants fully understand what the liability shift date means in the U.S.?
Topolski: The October 2015 date is out there and it is just for a liability shift in the fraud cost burden. It is not a line-in-the-sand deadline for anyone. It's a good date to keep aware of as a target, but not to get into too much panic that the payments world will start blowing up on that date if everyone is not completely ready. Everyone won't be ready.