Merchants are objecting to the U.S. EMV transition because of what they view as difficult technical challenges, unwarranted expense and payments industry politics.

"Eventually, this technology will be broken [by fraudsters], and you have to ask if there is any value in going into a process like this," John Gapinski, president of Secured Retail Networks said at the recent RAMP conference. "If I was a merchant, I wouldn’t do it."

At the same conference, Dee O’Malley, senior director of payment acceptance for Best Buy Co. Inc., said numerous problems plague the switch to EMV in the U.S., including some issuers that may not require use of a PIN with EMV cards as added security.

From the beginning, few expected a smooth transition as an entire large country converted from magnetic-stripe technology to the EMV (EuroPay, MasterCard and Visa) chip standard common in most countries.

For one thing, debate is continuing here over a common code, or application identifier, for routing debit transactions and providing merchants a choice of networks as mandated by the Durbin amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act.

"The common debit code is taking up so much bandwidth and attention that many in the industry are not looking past that to ask what’s next with EMV migration," says Randy Vanderhoof, executive director of the Princeton Junction, N.J.-based SmartCard Alliance.

For more than a year, EMV conferences and forums have addressed the common code as a dilemma unique to the United States. Other countries using the EMV standard have just a single debit network, thus they didn’t devise codes for multiple networks, let alone face federal mandates about merchant routing choices.

Earlier this year, Visa, MasterCard and Discover all offered their technology as the solution to routing all EMV debit transactions.

After comparing the card brands’ technology, the Secure Remote Payments Council, representing independent PIN debit networks, chose Discover’s approach to establish an independent and open network.

Visa continues to offer its technology as a multi-access option that has been expanded to include PIN, contactless, Near Field Communication mobile and no-CVM transactions, where CVM refers to cardholder-verification methods.

Still, no definitive agreement has been established that would allow a single application code on the EMV debit cards and terminals, meaning merchants and issuers could possibly find themselves dealing with at least three codes on the new EMV cards.

"Fewer [codes] is better because it is more streamlined, more right-sized," says Carolyn Balfany, MasterCard’s senior vice president and group head of U.S. product delivery.

No one in the payments industry wants to complicate the issue of switching to EMV chip cards, Balfany says.

"Durbin introduced a level of complexity already, and that’s when MasterCard opened its technology for use," she maintains.

Despite an apparent stalemate with the card brands and independent networks regarding a common code, Balfany says recent collaboration between members of debit committees at the EMV Migration Forum "has been terrific" in terms of coming to grips with the possibility of working with three codes and understanding what to do as differing transaction scenarios arise.

"We have three applications for routing transactions, with each of them being open to participation, so each entity will make choices and each issuer will make decisions on what to do," Balfany says.

But Mark Horwedel, CEO of the Merchant Advisory Group, doesn’t foresee merchants accepting any scenario beyond a single common debit code.

"If this is not resolved, you won’t see many cards issued and not many terminals accepting EMV debit," Horwedel predicts. "I don’t think the banks or merchants are happy with the three applications."

Even if the industry were to resolve the common-code issue, EMV transition would remain wrought with concerns, merchants maintain.

Consternation has grown rapidly since the major card brands announced timelines in August 2011 for whether the merchant, processor or issuing banks would take liability for fraud based on who was or wasn’t prepared for EMV smartcard acceptance.

Many merchants are seeking chip-and-PIN technology, instead of chip-and-signature to take full advantage of EMV’s security. They also want answers on how the networks plan to protect card-not-present transactions, if the expected shift in fraud moves online and away from EMV-protected point-of-sale terminals.

"Many of the merchants I talk to are wondering why they have to spend money for EMV upgrades to solve the issuers’ fraud problems, but they are getting nothing in return when asking for PIN protection or card-not-present security," Horwedel says.

Julie Conroy, senior analyst and fraud expert with Boston-based Aite Group, says the cost of EMV conversion in the United States is significant because about 12 million terminals have to be upgraded at between $200 and $300 each.

At the same time, Some describe EMV as "old technology" because it was introduced in Europe in 1994. EMV’s advanced age leaves merchants and issuers pondering what might happen that could render EMV moot.

However, Thomas Lillelund of the CPI Card Group asserts that calling EMV old technology is akin to saying automobiles are old technology because they’ve had four wheels for more than a century.

"The technology around those four wheels has always been changing, and it is the same thing with EMV," Lillelund says. "Even though the EMV standard is 20 years old, the technology around it is very different."


An expanded version of this article is scheduled to appear in the July-August print issue of

ISO&Agent magazine and on the website.

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