The advancement of mobile payment technology and how it correlates to the EMV conversion timelines in the U.S. was one of many topics attendees discussed at the first EMV Migration Forum meeting in mid-September.
The forum, a separate organization of the Smart Card Alliance, figures to play an important role in preparing merchants, acquirers, issuers and processors for the pending conversion to smart card technology in the U.S. Randy Vanderhoof, acting director for the EMV Migration Forum and president of the Smart Card Alliance, shared with PaymentsSource the key issues addressed at the forum’s first meeting and what lies ahead for the payments industry.
PaymentsSource: Did the forum have an agenda to address key topics at its first meeting or was it more of a planning session to set the table for how key concerns would be addressed in the future?
Vanderhoof: We organized this meeting to allow each stakeholder group to get to know the positions of the other groups.
PaymentsSource: If you can briefly describe them, what were considered key concerns and what were considered positive points in regards to meeting EMV deadlines (acquirer support for chip cards in 2013 and liability shift in 2015) in the U.S.?
Vanderhoof: Positive points were that a number of issuers talked about the EMV credit cards they have already issued and how smoothly their programs have operated. Also, terminal manufacturers said customer orders are starting to change over to fully EMV, contact and contactless-ready terminals. The software changes that are not available today will be able to be downloaded to the terminals so they do not need to re-install the hardware as changes happen. Issuers were assured that the chip-card manufacturers have plenty of inventory and capacity to ramp up production to meet demand. Many people are now engaged in discussions with partners and suppliers to upgrade project plans around the known timelines.
PaymentsSource: Was there a common theme or topic related to EMV migration that came up? Was it something that forum members could point to Canada or Europe to seek solutions or determine a proper approach?
Vanderhoof: One evident theme was that the U.S. market is very different than other markets, so the lessons learned and approaches taken in Europe, the UK, and Canada are not going to be the same for the U.S. This created a sense of urgency among all of the stakeholders that they have to get educated quickly and develop their own EMV migration plan. No one wants to be the last one standing when the rest of the market has already moved to EMV.
PaymentsSource: Is there a sense that merchants are leery about the EMV conversion? If so, in what areas—cost, technologies or overall business strategies?
Vanderhoof: Merchants spoke out on a number of different issues. They want greater security and to reduce fraud but are concerned about the costs to upgrade to EMV. They still don’t know if they have a solid business case yet. They are concerned about the timing because they only want to invest in this change one time.
PaymentsSource: The way payments technology is changing so swiftly, could merchants become paralyzed by information overload?
Vanderhoof: There are aspects of EMV that are still evolving, like mobile payments, debit network routing, and PIN vs. signature cardholder authentication. Merchants don’t want to move in one direction and have the issuers and mobile operators move in a different direction. And they are worried about card-not-present fraud and how their e-commerce channels are going to be affected by EMV.
PaymentsSource: Is the advancement of mobile payment technology viewed as somewhat of a conflict with, or undermining, EMV in any way?
Vanderhoof: Mobile technology for payments is just starting to take shape, yet no one knows for sure what will happen, or when and how the merchant will benefit from mobile payments. Merchants did not have a positive experience with contactless payment cards, so they worry if mobile is going to suffer from the same weak consumer adoption. Since the brands have all come out in support of contact and contactless EMV, there is little doubt that mobile payments will benefit from EMV more than it did from early contactless cards and stickers. But with any uncertainty, merchants may view it as a reason to put off making payments acceptance decisions until things are more settled, which adds pressure to meeting the EMV timelines.
PaymentsSource: In particular, do you think merchants would embrace EMV and NFC at their POS terminals, and be prepared for both in the same general time frame?
Vanderhoof: Yes, I do. Merchants are prepared to make the needed changes for EMV and NFC one time and do not want to do this in separate stages and disrupt their payments acceptance infrastructure multiple times.
PaymentsSource: Is it difficult to deliver the message about the technology behind EMV smart cards vs. the technology behind contactless NFC? Do merchants understand that these are “parallel” technologies, and not something that would run on the same “connection,” so to speak?
Vanderhoof: Yes, the merchants we talked to understand NFC payments and EMV are parallel changes at the point of sale.
PaymentsSource: After the meeting, was there a feeling of optimism and a desire to meet the challenges, or a feeling of doubt and uncertainty, i.e., an initiative in need of a lot more explanation and outside support?
Vanderhoof: I think there was a little bit of both. Optimistic, because they saw so much knowledge and experience in the same room asking the right questions and understanding the complex issues about EMV. Yet, they are also aware that this is going to be challenging and disruptive to their businesses. How they manage change and decide when and where to invest is going to have strong ramifications on their businesses over the next three to five years.
PaymentsSource: How much have payment planners from Canada or Europe helped in the education process for U.S merchants and acquirers?
Vanderhoof: Having experienced people at the table who can speak from firsthand experience about previous EMV migrations is very helpful. However, so many of those people are new to the U.S. payments market. They never had to deal with the diversity of issuers, processors, and merchants that the U.S. has. So, they often underestimate the market dynamics that exist in the U.S.
PaymentsSource: What’s next for the forum group? Does it have a list of top goals it wants to accomplish in a certain time frame?
Vanderhoof: The forum interim management committee will analyze the input from the attendees about what working committees the majority of the stakeholders wish to form and start to define these workgroups and start meeting next month. We are planning a second two-day face-to-face meeting for late fall, and expect to meet in person at least quarterly from this point forward.
PaymentsSource: What sort of involvement are we talking about with the forum?
Vanderhoof: We have 24 member organizations that joined in just the six weeks since we announced the forum. They include global payments brands, processors and acquirers, issuers, chip card manufacturers, terminal manufacturers, retailers, integrators, and training and testing organizations. The Smart Card Alliance has created the EMV Connection information website to keep interested parties informed.