U.S. Retailers Prepare for Move to EMV

Image EMV payment processingEMV, a global standard for credit and debit payment cards based on chip card technology, is coming to the U.S. The arrival of EMV, which takes its name from the card schemes Europay, MasterCard and Visa that developed it, has profound implications for issuers, merchants and the entire payments industry. Commonly used globally in place of the magnetic stripe, EMV chip technology drastically reduces card fraud resulting from counterfeit, lost and stolen cards; provides global interoperability; and enables safer and smarter transactions across cards, contactless, mobile, and remote payment channels. American Express, Discover, MasterCard and Visa have all announced their plans for moving to an EMV-based payments infrastructure in the U.S., with payment processor mandates in place for 2013, and major changes for managing fraud risk set for 2015.

The country’s retailers face some significant changes when this happens. Undoubtedly, one of the most significant impacts on U.S. retailers will be the cost and technical complexity of implementing EMV solutions. The actual cost of implementing such solutions can be significant as it includes software upgrade, the purchase of PIN pads and the cost of accreditation. Retailers running their own in-house payment systems will face higher costs. For example, they will need to ensure that they have staff that is skilled in both EMV and their chosen vendor’s software. They will also need to bear the cost of effort of PCI DSS (Payment Card Industry Data Security Standard) accreditation. These retailers will, however, benefit from greater control over their point of sale processes and will be able to ensure the fastest possible transaction speeds.

Retailers will be able to choose a hosted solution or a shared hosted solution. A hosted solution is where a merchant processer runs a retailer’s payment system on their behalf. This approach still allows the retailer to retain many of the benefits of running their own system. They will also benefit from access to the processor’s EMV skills and experience. The cost and effort association with PCI DSS accreditation will also be reduced. A shared hosted solution, on the other hand, is a low-cost, pre-accredited solution that is, in effect, shared by several retailers. It allows retailers to accept payments in the simplest and most inexpensive possible way and can reduce the scope of PCI DSS for the retailer.

The move to EMV is a significant change and retailers need to prepare accordingly. To join the payments ecosystem together as U.S. retailers adopt this new system, the Smart Card Alliance announced the formation of an independent, cross-industry organization, the EMV Migration Forum. The Forum will support the alignment of the EMV implementation steps required for global payment networks, regional payment networks, issuers, processors, merchants, and consumers to successfully move from magnetic stripe technology to secure EMV contact and contactless technology. For more information, visit the EMV Connection.