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5 issues that could hamper EMV smartcard adoption in the U.S.

Jaikumar Vijayan | Feb. 12, 2014
Migrating U.S. payment systems to the Europay MasterCard Visa (EMV) smartcard standard could take significantly longer than envisioned and offer fewer security benefits than what's being touted by proponents of the technology.

In the wake of the Target breach, "there is a meme that has developed that the U.S. isn't moving quickly to EMV — [and] if it did, that will make consumers safe," Huguelet said. "But there are several inconvenient truths to the current state of EMV in the U.S. that this sort of storyline ignores."

Seth Eisen, senior business leader with MasterCard North American Markets, downplayed such concerns. He noted that the liability structure under the proposed EMV model would be incentive for both U.S. banks and retailers to implement the most secure form of EMV.

"The terminal where the transaction takes place would determine the technology for the liability shift. If that terminal is not EMV and the card is, then the merchant is liable for any counterfeit fraud," Eisen said.

"After the liability shift goes into effect, the party that has the lower security standard will be liable for fraud if that were to take place." So banks and retailers have equal incentive to move to the strongest form of EMV, he said.

Visa did not respond immediately to a request for comment.

4. Time is also an issue
Moving the entire U.S. payment system to EMV will take a whole lot longer than October 2015 deadline.

Canada first began moving to EMV in 2003. More than 10 years later, only about 85% of the country's POS systems can take EMV cards, Taylor from PCATS said, and that's in a country with a more centralized payment system and far fewer POS systems, compared to the U.S.

Meanwhile, in countries where merchants have almost completely shifted to EMV-enabled POS systems, the banks have been slow to issue smartcards, Taylor said.

Migrating the U.S. payment system to EMV will take years, and by the time the process is complete, most payments would have shifted to mobile and online applications, Taylor said. "Visa and MasterCard are hell bent on making us homogenous with the rest of the world. But the fact is that we're going to be the last guys in on an aging technology."

Instead of focusing so much on EMV standards, the effort should be to develop technologies and techniques for securing payment methods of the future, Taylor said. In the meantime, several options are available to make payment technology safer, including end-to-end encryption, tokenization and mandatory PIN use, he noted.

5. Legal obstacles
One other obstacle to EMV adoption in the U.S., at least as far as retailers are concerned, has to do with the manner in which debit PIN and debit signature transactions are routed for processing.

Under a federal measure known as the Durbin Amendment, merchants are supposed to have a choice of at least two independent networks for processing debit transactions. The measure is aimed at increasing competition and reducing the controversial "interchange" fees that merchants pay banks and credit unions for each debit transaction.

 

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