Article

Visa to push EMV in US to encourage mobile payment adoption

Credit card company launches merchant, acquirer initiatives to spur adoption of card technology, mobile payments.

August 8, 2011 by James Wester — Editor 1, Mobile Payments Today

Visa Inc. is throwing its weight around to promote its vision of mobile payments. According to an announcement today, the company plans to push the migration to EMV contact and contactless chip technology in the United States. Visa said in the press release that the adoption of this type of dual-interface chip technology will help prepare the U.S. payment infrastructure for the arrival of NFC-based mobile payments.

"By encouraging investments in EMV contact and contactless chip technology, we will speed up the adoption of mobile payments as well as improve international interoperability and security," said Jim McCarthy, global head of product, Visa Inc., in the announcement. "As NFC mobile payments and other chip-based emerging technologies are poised to take off in the coming years, we are taking steps today to create a commercial framework that will support growth opportunities and create value for all."

When "push" comes to "shove"

As a part of Visa's overall plan to spur the use of dynamic chip authentication technologies, the company announced it would be launching three initiatives aimed at card issuers, merchants and merchant acquirers, the companies that connect merchants to the Visa network. According to Visa's announcement, the initiatives include:

• Expanding its Technology Innovation Program (TIP) to include U.S. merchants. The benefit for merchants is a waiver on annual validation for their PCI compliance if their terminals support both contact and contactless chip acceptance, including mobile contactless payments based on near field communications (NFC) technologies. This inititiative will begin on October 1, 2012.
• U.S. acquirers and companies that resell an acquirer's services will be required to support their merchants accepting chip transactions by no later than April 1, 2013, including support for the additional data that must be transmitted with chip transactions. Visa said in its announcement it would provide those organizations additional guidance later this year on how to certify their systems can handle the additional data.
• Visa will shift liability for fraudulent domestic and cross-border card-present POS transactions beginning October 1, 2015. (It will give merchants with automated gas pumps an additional two years before shifting liability on fraudulent transactions at those terminals.) The shift means that merchants who are presented a contact chip credit card, and have not adopted contact chip terminals, may see liability for fraudulent charges on that card moved from the card issuer to the merchant's acquirer. The move will encourage acquirers, who are oftentimes the vendor for a merchant's POS hardware, to exert pressure on their merchants to update their POS equipment.

It's not just about mobile, it's about security

In its press release, Visa said the adoption of chip technologies will help protect all parties, including merchants and consumers, against fraud. Chip technologies reduce a criminal's ability to use stolen payment card data by introducing dynamic authentication values for each transaction, Visa explained in its statement. Without the card's unique elements, i.e. the "dynamic authentication values," a counterfeit card using compromised data would be worthless at the point of sale.

"Dynamic authentication is the key to securing payments into the future," said Ellen Richey, Visa's chief enterprise risk officer, in the statement. "Adding dynamic elements to transactions makes account data less attractive to steal and takes more merchant systems out of harm's way, shrinking the battlefield against criminals."

Richey called the migration to chip technology an important security layer and a critical step in promoting dynamic authentication across all markets and all channels.

For online transactions where a credit card is not present, Visa said it is designing a digital wallet with "click-to-buy" functionality that supports dynamic authentication across multiple channels, including e-commerce, to go along with its existing fraud detection tools and cardholder transaction alerts.

Merchants on board

While Visa's strategy, especially the initiative shifting liability to the merchant side of the consumer/merchant relationship, may sound heavy-handed, Visa included several supportive statements from major retailers in its announcement to show some big retailers are on board.

"As the leading global foodservice retailer, McDonald's already has a great deal of experience with chip technology, including in the U.S. where we have deployed contactless chip terminals to help us serve our customers even faster," said Dave Weick, CIO for McDonald's Corp., in the announcement. "We're pleased that Visa has provided a roadmap that will allow us to move towards the next generation of payment technology, while at the same time take advantage of the security benefits of EMV chip and dynamic authentication."

McDonald's has been a long-time proponent of contactless technologies at the point of sale. The company rolled out contactless payments in the U.K. and Australia earlier this year and has accepted contactless in the U.S. since 2004.

"Visa's plan to encourage chip adoption and lay the groundwork for mobile payments is a positive development," said Kevin Knight, executive vice president, Nordstrom Inc. "We appreciate their efforts to promote improved technology so that our customers have more reliable and secure card use and payment for their purchases."

Whether or not smaller retailers will be as amenable to Visa's efforts to encourage EMV and mobile-enabling technologies is yet to be seen, but at least one industry observer thinks Visa's plans should not concern merchants.

"Visa is making or has made significant investments in EMV and NFC," the analyst said, "and they would like to see it pay off in its largest market. Their timeline is realistic, and I’d bet there will be some dollars flowing to help speed it along."

According to the analyst, however, not every player in the payment value chain will find Visa's news so appealing. Most acquirers that process payments internationally, where EMV transactions are common, can already abide by Visa's new dictates, he said, but for domestic acquirers, there is still a lot of work to do.