Visa unveiled plans that allow issuers to clear some of the hurdles involved in adopting EMV chips, a card technology widely used outside the United States, which Visa will force retailers to accept over the next several years.
Visa Inc. (NYSE: V) announced that it, rather than banks, credit unions and other card issuers, will validate EMV encryption codes for card issuers.
Additionally, Visa said cards that sport EMV chips will include a code called an iCVV (ICC Card Verification Value), which is similar to the Card Verification Value security code used by American consumers to authenticate their credit and debit cards.
The iCVV introduces another layer of security on Visa’s EMV chip cards. However, the chip-based iCVV must be converted to the magnetic stripe-based CVV before card issuers can review transaction data.
To reduce the need for change to issuers’ back-end systems, Visa will handle the conversion.
Staying on Track
Derived from the names of global payments processing companies Europay, MasterCard and Visa, EMV chip technology has become a standard in many foreign developed nations to fight rampant card fraud.
Embedded in credit and debit cards, EMV chips generate unique payment data that changes with every transaction — preventing card skimmers from stealing such information and replicating victims’ cards. The chip technology also offers contactless payments capabilities — sometimes called near-field communications (NFC), the sort of wave-to-pay systems used in gas stations, convenience stores and other retailers.
In August 2011, Visa outlined plans to expedite U.S. adoption of the EMV standard. Beginning Oct. 1, 2015, Visa will shift fraud liability to merchants that do not offer payment terminals under the EMV standard.
MasterCard also recently released its own roadmap to push EMV.
“Migrating the U.S. market to chip will help build an infrastructure for accepting NFC mobile payments, enhance international acceptance and reduce fraud,” said Stephanie Ericksen, head of authentication product integration at Visa, in a prepared statement.
Chase, Wells Fargo, and U.S. Bank are among the biggest U.S. banks that currently offer the next-generation Visa EMV chip security to customers who are affluent or frequently travel abroad.
In the past 18 months, Visa has issued an estimated one million EMV chip cards. Prior to that, Visa did not issue any EMV chip cards in the U.S.