When EMV came to market in Europe in the 1990s, it entered a world with a much less robust communications infrastructure than what the U.S. has today. So, following the launch of EMV in the U.S., Visa decided it was time to break some old habits.
The card networks' recently announced Quick Chip program whittles down the EMV authorization process to the essentials. EMV payments use counters to determine whether a transaction is being presented out of sequence, a process that is useful for detecting counterfeit fraud at terminals that handle transactions offline.
With a live connection to a reliable communications infrastructure, such steps — which added a noticeable amount of time to the process — are no longer necessary in most retail settings.
"We are not updating any offline counters on the card any more, so we wanted to allow the card to be removed from the terminal much earlier in the transaction cycle," said Stephanie Ericksen, vice president of risk products at Visa.
With Quick Chip, the consumer can leave the card in the terminal for just two seconds; historically, consumers had to leave the card in the reader for up to 10 seconds. Visa is enabling this new process via a software upgrade at the merchant's terminals.
Prior to this change, the chip card was already generating its unique cryptogram at the beginning of the transaction. The terminal reads a verification list, so it can determine what the card can support in terms of signature or PIN, and then awaits the transaction authorization.
Afterwards, the card is left in the reader to determine if any updates were needed for the card, if any offline counters had to be reset or if any offline PIN needed to be changed — steps that are no longer necessary at the retail POS with today's technology, Ericksen said.
"That is not common now, so being able to remove the card faster now does not affect the cryptogram or security," Ericksen added.
The introduction of Quick Chip "lowers the bar for changing consumer behavior," which is a good thing for merchants, said Thad Peterson, senior analyst with Boston-based Aite Group. "It will also simplify the customer service aspects of the transaction, as the clerk won't have to guide the customer through the transaction."
While merchants are concerned about transaction speed at the point of sale, many consumers have complained the experience of paying with an EMV card can be starkly different depending on the merchant, Peterson added. Some EMV-enabled merchants even force their terminals to default back to magstripe as a way of speeding up the process.
"It's an evolutionary process and since the U.S. point of sale ecosystem is built on real-time authentication capability, which makes for very rapid transactions, the latency caused by EMV may have been more noticeable in the U.S. than in other markets," Peterson said.
Because the problem was so visible, it created the opportunity for Visa to provide a solution, he added.
Visa has not secured any merchant partners for Quick Chip as of yet, but expects many to announce a timetable for making the needed software changes through their providers.
“Any advancement that increases speed will be a good thing for the merchants,” said Mark Horwedel, CEO of the Merchant Advisory Group. “We have many members in our organization in which speed is their main concern.”
However, merchants will remain wary of any new advancements in EMV until they take a deeper dive into the specifications, for fear that Quick Chip might cut out other processes that can affect a merchant's costs, Horwedel said.
“I have to look further into this, but it is not an open network and the major card brands have always owned the specs for EMV,” he added.
Visa says transactions moving through Quick Chip technology will allow the choice of routing through the common application identifier, which was one of Horwedel's concerns.
In the future, Visa is hoping to make Quick Chip an automatic option for merchants. For now, stores have to rely on their vendors to provide the updated software.
"If there are any merchants who think the speed of transactions has an impact on them, this is certainly something that can help address that concern," Ericksen said.
Even before Visa revealed its Quick Chip option, the card brand has been optimistic about EMV uptake and its effectiveness in thwarting counterfeit fraud at the point of sale.
"We have more than 1 million merchants adopting EMV, and last year at this time we had less than 500,000," Ericksen said. "We are seeing about 20,000 to 22,000 merchants come on board with EMV every week, and three-quarters or more are small and medium size merchants."
As the industry moved toward the October 2015 EMV migration liability shift, it was expected that small merchants, some not even aware of the conversion to chip cards, would be among the last to make the change.
In addition to rising adoption, Visa has also reported that the top five merchants that have enabled EMV have seen an 18.3% reduction in counterfeit fraud from the fourth quarter of 2014 to the fourth quarter of 2015.
Visa has more than 265 million chip cards in circulation and recorded 303.3 million chip card transactions last month alone.