EMV to come to the US?
In September 2009, the Aite Group conducted an online survey of over 1,000 international travelers that reside in the US This survey investigates not only the type of issues travelers may have faced while paying abroad, but their subsequent reactions and changes in behavior. Findings include:
- Nearly half of US cardholders visiting Western Europe, Asia Pacific, The Middle East or Central Europe in the last four years have experienced some form of problem using US issued payment cards.
- Two thirds of these problems could be directly addressed by US card issuers.
- An estimated 9.7 million US cardholders experienced issues with card payments abroad in 2008.
- Two thirds of cardholders that travel outside the US would be interested in a product that made their card payment experience similar to what they are used to in the US However, of this group, only a quarter would be prepared to pay “a reasonable fee” for special benefits and capabilities.
With nearly half of US travelers reporting problems with their magnetic stripe cards abroad, the need for a globally accepted EMV card has never been more urgent. However, rather than interpreting this need as an insurmountable challenge, card issuers should view it as a tremendous opportunity to acquire new cardholders, grow revenue and gain top of wallet status with existing cardholders.
Now, the first US financial institution to issue EMV chip cards, the United Nations Federal Credit Union (UNFCU), explained how it is responding to the needs of its international travelers, and Wal-Mart, the largest US company, strongly advocated a move to chip and PIN.
Merrill Halpern, card services manager at UNFCU, explained that since so many of their members travel internationally, they had many customers asking them to provide a card that would be interoperable in countries that have implemented EMV. To address these concerns, UNFCU is introducing a contact EMV card for its elite cardholders, and plans to evolve into dual contact/contactless technology (cf. Smart Insights Weekly #10-20).
Wal-Mart is also interested in moving to EMV for security reasons. Wal-Mart already has 100% of its payment system hardware equipped to accept EMV Chip and PIN, and is finalizing the software programs for these devices.
Dodd Roberts, president and CEO of the Merchant Advisory Group, said the large retailers who are his organization's members are asking that all of the payment industry stakeholders come together to set a direction toward EMV in the US that does not require multiple stages of investment in interim solutions.
Robert Carr, CEO of Heartland Payment Systems, expressed his view that payment with mobile handsets will drive the country to EMV, citing its popularity on the college campuses for which Heartland provides processing. Since that requires an evolution in the payment systems that will take many years, he argues, and in the meantime there are eight million merchants in America that need protection now, Carr's organization is beginning to deploy end-to-end encryption as a way to provide his merchant customers with an immediate solution.
However some analysts said that most US issuers are loath to disrupt the existing model because, according to Wal-Mart, if EMV was to become commonplace in this country, they would lose significant revenue on signature-based credit and debit card interchange fees.
Another problem for US financial institutions to switch to the Chip-and-PIN standard is the cost. According to the consulting firm Javelin Strategy & Research, the industry should pay about US$ 8.6 billion (EUR 7 billion) to convert to EMV.