As preparations continue for the migration to the EMV chip-card standard in the United States, payments companies must ensure that point of sale terminals are compatible with both card networks’ standards and the myriad card issuers on those networks.
In addition to internal testing processes, third parties are developing independent verification services to assist in the efforts. Underwriters Laboratories is one such provider, offering verification and validation services of card brands and POS terminals and ATMs.
The testing process takes place in a controlled environment that verifies the interoperability of the terminals and the cards, checks terminals for compliance with the Payment Card Industry data security standards and ensures that both EMV cards and terminals meet industry standards for tamper-resistance.
Verification services companies like UL and ICC Solutions have already been through this process during the European adoption of EMV and now these companies are bringing their expertise to the U.S. market.
UL simulates both payments networks, terminals and cards to independently validate all the components in the transaction, explained Brian Watson, director of Verification Services division of Northbrook, Ill.-based UL.
“We put the card into the machine and the card thinks it’s talking to a payment device, but we’re actually simulating the payment device,” Watson said of one test, adding that a separate test simulates EMV cards to validate POS terminals.
“We’re sending commands between terminals and cards and making sure the response you get is what it should be,” he said. “We’re in a laboratory environment so it’s safe and there’s no danger if a card isn’t functioning correctly. It can’t do any harm to the real payment environment.”
While PCI and EMV standards have been developed for widespread industry use, the interoperability risk to merchants is very real. When Canada adopted the EMV standard, some companies faced costly setbacks because they underestimated how the transition would affect other core systems.
According to UL, U.S. banking and financial institutions missed out on $4 billion in transactions and $78.8 million in transaction fees in 2008 because of acceptance issues abroad. While the deadlines for EMV adoption are aggressive, Watson says he believes they will be met.
“The U.S. is out of step with the rest of the world now,” he said. “If people come into the U.S. or go out of the U.S. and don’t have a card that works, that doesn’t make sense.”
Watson explained that in countries where EMV is not the standard, it’s common for merchants to have to equip themselves with multiple payments terminals to avoid not being able to accept their customers’ preferred method of payment. When EMV was first introduced, the security standards and transaction protocols developed for the technology laid the foundation to avoid this problem.
“It was clear you didn’t want a consumer going into a shop and not be able to pay with their card,” he said.
Ensuring compliance with those standards will be integral to the adoption of EMV in the U.S., which Watson says will also help set the stage for greater mobile and contactless payments technologies. Watson believes the U.S. also has a unique opportunity because of the timing of the adoption of EMV and mobile payments. In Europe, merchants have already adopted EMV and must now dedicate additional resources for mobile payments. But in the U.S., merchants can do both at once.
“When we move to the next stage, which is mobile payments, EMV is a stepping stone,” he said. “Having EMV gives you the opportunity to do mobile and contactless payments.”
In addition to its EMV card testing services, UL has already begun working with mobile handset developers to test and validate their mobile payments technology.
“Most of the mobile payment models are preparing for an EMV standard,” Watson said. “If that’s going to happen in North America, than North America needs to be EMV compliant.”