MasterCard has joined fellow payments processor Visa in its push to bring EMV chips to the United States, in an effort to make electronic payments systems more secure. Currently, credit cards in the United States use a magnetic stripe to store account numbers and customer data, making them vulnerable for forgery and fraud. Bringing EMV to the United States will require significant merchant systems upgrades.
MasterCard launched a page on its Website announcing their roadmap to bring EMV compliance to the United States. Working with stakeholders in payments, including both merchants and issuers, MasterCard has developed a plan to implement this goal.
They plan to focus on all potential channels, including not only merchant point-of-sale terminals, but also ATMs, as well as online and mobile payments systems. By providing financial incentives to merchants for making the upgrades, MasterCard aims to have merchant infrastructure upgraded to EMV compliance by April of 2013.
Similar to Visa’s Plan
This is the exact same date that Visa chose as a deadline for merchant POS upgrades when they announced a similar plan in August of last year. Apparently our benevolent payments duopoly is not afraid of appearing to work in tandem. This should come as no surprise, however; EMV is an acronym for Europay-MasterCard-Visa, after the three companies that worked together to develop the system. By working together, the two payments processors can ensure more widespread acceptance of their cards, while minimizing fraud risk.
“Our roadmap represents a transformational shift in the approach to payments and is not simply about EMV, chip and PIN,” said Chris McWilton, President of U.S. Markets, in prepared remarks. “We’re focused on readying the ecosystem to drive future innovation and provide new consumer experiences to enhance the value of electronic payments.”
EMV cards have a chip embedded within them, which allows for ‘dynamic authentication’ of the card at the point of sale, unlike a magstrip, which has static information programmed onto it. And instead of requiring a signature to verify the transaction on the consumer end, EMV requires customers to type in a PIN. Not only does this increased security make it more difficult for criminals to steal credit card information, it also transfers more liability onto merchants and consumers.
We’re Well Behind Europe
The United Kingdom switched over to EMV in 2006, and last year nearly every European ATM was made EMV compliant, both delivering significant drops in fraud. According to the European ATM Security Team, the introduction of EMV compliance reduced ATM skimming by two-thirds — from 300 million Euros annually to about 100 million.
Banks frequently point to costs associated with fraud prevention as a justification for steep interchange fees charged to merchants when they accept credit and debit cards. With EMV these costs should drop, which, in theory, should lower the merchant discount rate. However, the initial compliance outlays might offset this. Ultimately, this will benefit consumers, and has the potential to be a drag for merchants.