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Secure Transactions News

US issuers plan EMV smart card migration

Thursday 11 March 2010

This is the surprise announcement made by Steven Elefant, chief information officer for Heartland Payments Systems, which is ranked the fourth largest card payment processor in the US. Elefant said that US issuers would begin migrating to EMV standard smart cards this year that caused jaws to drop.

The US has been the single largest and most adamant opposer of EMV migration. Its issuers have always argued that 100% online authorization is all the industry needs, but several recent trends are changing that view.

For a start, US travelers abroad are increasingly having their magstripe cards refused by merchants not willing to risk a charge-back. There is no liability shift with US issuers, so if there is a fraud, it is the merchant acquirer, and usually the merchant who takes the rap when a US magstripe card has been cloned.

Tourists are also finding it difficult to use their EMV smart cards in the US for similar reasons.

And then there is the risk of data theft. Magstripe cards have a significant amount of cardholder data on Track 1 and 2 of the magnetic stripe, do are much less secure than Chip and PIN cards because they can be more easily hacked by fraudsters.

A third reason for the migration is customer retention. Smart cards enable more sophisticated loyalty schemes to be run with the cards and in a market where banks are extremely keen to retain customers, this is an interesting attraction.

On the other side, contactless payment is believed to be the de facto standard for US transit fare collection systems, and will likely become a principal market driver for the expansion of bank-issued contactless cards. But that is just one of many factors building interest in the United States around chip cards for payments.

Merchant acceptance of contactless cards today, and their receptiveness to eventually using chip cards for security reasons, were actively discussed topics in several sessions.

Dodd Roberts, president of the Merchant Advisory Group (MAG), argued that retailers are willing to invest, but what is holding them back is confidence in a technology roadmap that has an end point agreed upon by all the stakeholders.

Putting up a slide that showed a winding US payment technology path that included end-to-end encryption, tokenization, contactless and EMV technology, Roberts said, “You have merchants out here on this road and everyone is in different places and trying to figure out what they invest in, why and when.”