Even as debit networks and other participants finally get on the same page for EMV chip-card acceptance, the U.S. is still a long way off from widespread consumer adoption of EMV cards.
"You are not going to see a flood of EMV cards, but you will see some trickling out this year," says Julie Conroy, senior analyst and fraud expert with Boston-based Aite Group.
Conroy spoke to 15 of the top 30 issuers in the U.S. as well as some in the UK and Canada for an upcoming Aite report on the progress in adopting the EMV standard.
"There will be gradual, but several, deployments next year because they will issue EMV cards as mag-stripe cards reach expiration," Conroy says. "Many of the issuers are not waiting until 2015."
In October 2015, most merchants must accept EMV chip cards at the point of sale to avoid a shift in fraud liability. Gas stations have an extra two years.
The words "not waiting" are music to the ears of technology companies helping U.S. issuers prepare for the EMV conversion.
U.S. banks need to aggressively prepare for EMV now because much more data goes into the chip on an EMV card, making it a far more complex process than issuing magnetic-stripe cards, says Mansour Karimzedah, chief technology officer of SCIL-EMV Academy and co-chair of the EMV Migration Forum debit network committee.
"The EMV application has to go on the chip, as well as the encryption key and the digital certificates, all coming from different sources," says Karimzedah, whose company will operate as a reseller for Milan, Italy-based TAS Group, an EMV migration technology provider that plans to expand its operations in the U.S.
EMV cards go through a lengthy and complex formatting process prior to the issuing bank sending the data to companies like Datacard and to "the machine that churns out these cards," Karimzedah says.
For the issuer, it is more cost effective to distribute cards in big batches but instant issuance of individual cards is also possible, he says.
EMV cards in the U.S. will continue to include magnetic stripes, likely for several years, says Ennio Ponzetto, president of TAS Group in the U.S.
"We have worked on cards at hundreds of banks in Europe, and even the European EMV cards still have mag-stripes," Ponzetto says.
EMV and mag-stripe standards will co-exist because there is always a legacy product to hold onto, Ponzetto says.
In helping banks prepare for EMV, Ponzetto says his company steals a catch phrase from the U.S. in describing how to overcome the complexities.
"If there is a will, there is a way," Ponzetto says.
In Europe, each country and bank system had its own issuing guidelines and needs, Ponzetto adds. The UK and Italy were fast adopters of EMV, while Spain became "the U.S. of Europe" in its initial reluctance to change, Ponzetto says.
In hoping to ease that reluctance, TAS Group provides Emission, a data preparation software system for creating and issuing an EMV card, as a tool to help U.S. banks speed up their migration.
But all of the tools in the world may not help overcome potential consumer confusion if the U.S. payments industry can't agree on whether EMV cards should use a chip-and-PIN or chip-and-signature approach, Conroy says.
"We are so fragmented here because some banks will issue chip-and-PIN and some chip-and-signature," Conroy says.
Proponents of chip-and-PIN say the use of a PIN dramatically decreases fraud incidents when a consumer loses an EMV card.
However, most of the issuers Conroy interviewed intend to issue chip-and-signature cards because they find lost or stolen cards represent only a small portion of fraud losses. "They would rather go for the convenience factor of chip-and-signature," she says. That convenience would include less complicated technology, less expensive routing and eliminating the need for new PIN pads.
Ponzetto and Karimzedah say they can't fathom why the debate is even taking place. Ponzetto equates the choice of chip-and-signature to buying a new product, but only using the features offered in the previous model. Karimzedah says, "the reason for EMV is security and there is more security in the PIN."