Is EMV 'A Colossal Waste of Time' for US Retailers?

EAST GRINSTEAD, U.K. - Oct. 20, 2015 - PRLog -- ‘Industry experts’ and observers in the US marketplace recently reported “EMV Return on Investment unlikely for Retailers”. But is this true? And either way, does it matter, are there bigger issues at stake? To understand the issues, we must dig a little deeper.

There are probably THREE main issues to consider here:

Where is the USA compared to the rest of the world?

Who should be driving and leading the change in the US?

What are the costs / savings and overall business case?

REST OF THE WORLD

In spite of EMV being ‘invented’ by US head-quartered companies, the US market has consistently deferred adoption for a variety of reasons that are shown later; leaving the rest of the world to adopt EMV as the route for all card present transactions. There are of course ‘local adaptations’ for CVM requirements, offline authorisation, routing logic and other minor customisation of EMV standards, but generally, everyone has simply implemented the programme over the last 15 years and built upon the programme and the standards over time with increasing security and standards adopted as they have been required.

Has it worked and does it matter that the US is behind?

It is not an easy journey, but EMV has delivered on all expectations outside the USA, with significantly reduced card present fraud – both counterfeit and lost/stolen. EMV cannot deliver ‘world peace’, nor was it expected to do so, nor was it ever expected to fix or prevent the never-ending data breaches, nor protect against traditional CNP fraud events. It does however, enable a largely ‘risk-free’ payment platform for other initiatives such as secure NFC contactless; improved merchant and customer experiences, faster point-of-sale timings (even in a market of simply swipe and go), reduced occurrence of payment disputes; and moving the smaller remaining fraud liability from the participating merchant to the card issuer.

Furthermore, data compromises at places like Target, notably take place in the USA; largely because cards that are compromised utilise the old-fashioned ‘mag-stripe only’ technology. It has not been widely reported either, that EMV cards are largely useless to fraudsters after such compromises – except for use in the USA – where, even there, they would not be possible to use were there not still a magnetic stripe-only environment.

The rest of the world is looking forward to the long-awaited and delayed ‘transfer of liability’ that kicked-in on 1st October 2015 – when the so-called ‘liability shift’ took place.

WHO SHOULD BE DRIVING THIS?

“Everyone” is the short answer – but in the US there are a few tough obstacles. The payments environment is embedded in the old technologies, legacy systems where the ‘lowest common denominators’ in the USA are fears of losing routing and processing revenues, control and profitability when the market adopts EMV technology; and issuers who protect their world-leading high interchange rates (as well as high fraud rates) that come with the insecure networks. The costs for a retailer associated with processing an EMV transaction – especially an EMV with a CVM such as PIN should fall – as the till throughput can be speeded up and the disputes and ‘validation/referral costs’ almost removed. Retailers are naturally confused, and they are trying to find other solutions, and the wider industry does not have a single strategic planning function or voice.

In many markets the retailer and retail communities demand:

Lower processing costs. To lower costs, some retailers champion interchange rate cuts, and greater transparency, and still others move their processing (even contrary to card scheme rules) to other continents!

Faster customer service at the till – i.e. EMV solutions should require customers to retain control of the card (at the ‘customer side’ of the till) – and with a PIN entry to speed-up and secure the customer journey and processing efficiencies, to focus retailer staff on service rather than upon security checks for the banks.

Lower administration/dispute costs: associated with no need to keep or retrieve paper versions of receipts with ‘signatures on them’, where vouchers become ‘electronic’.

COSTS / SAVINGS / BUSINESS CASE

The business case for EMV adoption and its implementation was and still is not an easy one. It is difficult to justify an initial upfront cost (and ongoing costs) of deploying an EMV infrastructure with all its ‘back-office’ functions – for both big and small merchants. But the industry has calculated that the cost of fraud is greater than the cost of EMV migration, so benefits to the financial services industry are clear.

To reduce pain in implementing EMV in almost all markets, the planning and coordination has been carried out over an extended period of time. This made sure that:

Complex solutions were made easier, and that this was not seen as a ‘quick-fix’,

Costs were spread over a multiple years,

Advantage could be taken of constantly improving and new vendor solutions,

Early attacks on certain fraud types could be seen as ‘quick wins’,

All interested parties could engage and collaborate,

New payment solutions could evolve that took advantage of the EMV ‘railroad’,

Synopsis

So is it a colossal waste of time to implement EMV? The answer is a profound and clear ‘No’.

Riskskill is just one of only six organisations globally that have been confirmed as qualified and approved to complete GARS Reviews for Visa Inc. For further information, please contact Kevin Smith (Independent payment services, risk management and compliance consultant) at http://www.riskskill.com/ or contact him at enquiries@riskskill.com