The day when the U.S. joins many other large markets globally in converting to EMV chip-and-PIN cards from magnetic stripe versions will not occur any time soon. But it will come eventually, observers predict.
“At this point it’s a matter of when, not if, we’ll see EMV in the United States,” George Peabody, director of the emerging technologies advisory service at Mercator Advisory Group Inc., a Maynard, Mass.-based firm, tells PaymentsSource.
EMV is an international standard for chip-based payment card transactions that requires a PIN to authenticate the cardholder, and it provides some security advantages over signature-based mag-stripe cards, Peabody says. The chip in an EMV card and the point-of-sale terminal engage in a two-way authentication procedure, which is especially important in offline transactions in which the merchant does not secure issuer authorizations, he says.
“Security is about layered defenses,” Peabody says. EMV adoption would make it extremely difficult for fraudsters to create cards with stolen card data, he says.
Today’s efforts in developing tokenization protocols, in which sensitive transaction data are replaced with a code, and encryption of payment details throughout the entire transaction cycle can complement EMV, Peabody says. “End-to-end encryption and tokenization are techniques to look after the card data from the terminal,” he says. EMV protects the card data between the card and the terminal.
U.S. EMV adoption is a long-term prospect, agrees Cliff Gray, an associate at The Strawhecker Group, an Omaha, Neb.-based consultancy. Eventually, payment schemes will encrypt transactions from time the card is swiped until it reaches the issuing bank, he says. Current measures encrypt transaction data from the merchant to the processor, leaving a gap from the processor to the issuer, Gray explains.
EMV would be one component of this advanced payment scheme. “From the card itself, an encrypted credential will pass through smart, safe merchant devices and only be decrypted at the issuer,” Gray says. “That is the real long-term eventuality.”
For now, however, advanced fraud-protection measures will help ensure the longevity of the mag-stripe card, suggests Kim Fitzsimmons, senior vice president at First Data Services in Atlanta. “With the introduction of tokenization and encryption, the current mag-stripe payment method has a life into the foreseeable future,” she says.
Fraud-prevention efforts will be an important factor in determining how U.S. card technology evolves, Fitzsimmons says. “Issuers, acquirers and merchants are going to continue to look for fraud-mitigation options to further reduce risks with the current payment scheme in the United States,” she says.