News & Views - Savantor

EMV Chip in the US – an Informal Survey

Friday, 30 March 2012
It’s been a long time coming, but there are indications that the US is finally going to embrace EMV chip.  Recently, both Visa and MasterCard have announced measures to encourage EMV migration in the States, several banks have started issuing chip cards (albeit only to frequent travellers) and some merchants are upgrading to EMV-compliant POS terminals. 
To find out the current market view, Auriemma Consulting Group and Savantor undertook a “listening tour” interviewing senior officers at a handful of banks, retailers and other payments organisations to get a feel for what they are thinking and how they see the EMV chip story panning out in the US.  Whilst we talked to roughly equal numbers of banks and retailers, we have consolidated their responses, only drawing attention to different views from these two communities when they are noteworthy.  Key findings were:
• Everyone believes migration to EMV chip in the US is now inevitable, but few expect it to happen before the newly mandated headlines.
• Many do not regard EMV chip as a high-priority, long-term strategic issue.
• Chip with signature verification is expected to be deployed, rather than Chip + PIN.
• Mobile NFC and other emerging payments models increase uncertainty.
• Large retailers are the main drivers of EMV migration, with many other stakeholders adopting a “wait and see” attitude.
• There is a lack of central coordination and leadership
Three issues seem to us to be worth highlighting as areas of confusion and concern which need early clarification and resolution.  The first is the issue of cardholder verification.  Merchants, in particular, gain from a faster, cleaner checkout process and a payment guarantee which is no longer contingent on obtaining and checking the signature.  We believe failure to migrate to full chip and PIN in the US could turn out to be a long-term strategic mistake
A second issue raised by most interviewees was that of mobile NFC payments.  Our feeling is that mobile NFC may have been over-hyped and is a distraction from the main issue of standard, contact EMV payments which still account for over 99% of branded chip card payments in other countries. The key point to be made here is that if there is to be a wholesale update of the point-of-sale network, the opportunity must be taken to include NFC capability as a matter of course.
A third issue is the lack in the US of any central coordinating body such as the UKCA, APCA or equivalent bodies in most other countries which have successfully migrated.  If anything, centrally coordinated direction and communication is even more important for the US card payments industry because of its complexity and fragmentation, but with no sign of any central body willing to adopt this role, it falls to the card schemes to lead the industry.
The overall picture which emerges is that although the US has started on the journey towards EMV chip, it has not done so wholeheartedly and there remains, in the words of one interviewee, “a mountain to climb”.   A great deal of uncertainty is evident, and in this climate it is not surprising that most stakeholders are reluctant to invest proactively in the new technology or position themselves as leaders, with many preferring to adopt a “wait and see” positioning.  This is unfortunate since there is a great opportunity for the US to complete the global chip project by embracing EMV rapidly and comprehensively, using the lessons learned from other countries to include added-value features from the outset. 
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