Editor’s note: This is part of an ongoing series of blog posts that will address the questions of Why, When, Who, What and How as they relate to the EMV chip card migration in the United States. Tweet using the hashtag #AskOT if you have questions for our experts. Or submit your question to Ask OT here.
“The only reason for time is so that everything doesn’t happen at once.”
Einstein wrote those words, and we’ll leave it to intellects of his caliber to discern what they mean. Meanwhile, the rest of us would do well to wrap our minds around the timing of America’s transition to EMV chip cards.
What’s the first date that comes to mind? For many of us it’s October 1 of this year. That’s when the liability for card fraud that EMV could have prevented shifts from the card issuers to acquirers and probably the retailers that haven’t implemented the standard. (Gas stations get an extra two years to upgrade pay-at-the-pump devices.) To avoid shouldering financial responsibility for crimes committed with payment cards after that date, merchants should install terminals that read EMV cards.
But it’s a liability shift that’s coming at a very late stage of the worldwide transition to EMV. Most of the planet has already made the switch from cards with magnetic stripes to cards bearing computer chips that contain cardholder data.
In fact, my work with chip cards began in 1991, when a team at Europay International, now part of MasterCard, conducted a study that showed smart cards could effectively address fraud. By 1992, France completed the transition to chip cards that it began in 1984.
In 1993, six people representing Europay, MasterCard and Visa sat down in a Chicago hotel conference room and agreed to develop a standard that would come to be known by the first letters of the companies’ names – EMV. By 1996, the card networks published a workable version of the EMV standard.
Some countries quickly took up the banner of EMV, defining a set of collective principles and agreed-upon timelines to their migrations. Some nations embraced EMV early because their phone systems lacked the sophistication to easily carry card data. Others took to EMV early because they had highly developed but costly telecommunications. All were motivated by the goal set by the founders of EMV to address – some would say eliminate – the threat of counterfeit and lost/stolen card fraud.
Approaches to EMV tended to mirror countries’ politics, economics and sociology. Some chose a tyrannical, dictatorial introduction of EMV, while others issued friendlier directives and some even tried to win over citizens by generating a sense of public-spirited cooperation. The U.S. is relying on market forces to work out the details of EMV.
Why Other Countries Made the Migration to EMV Sooner
The forces that controlled the transition in various countries offered differing carrots and sticks. A liability shift, for example, is a stick for merchants and a carrot for issuers. Some considered introducing incentives to drive deployment of EMV-enabled terminals as a carrot for the acquirer and merchant community. Some countries chose PIN and others picked signature.
In the United Kingdom, for example, the liability shift was scheduled for January 1, 2005. The country deployed chip cards and embraced PIN with a national “Love your PIN” campaign designed to help the public accept EMV as the national standard for cardholder verification. The UK also adopted the consumer-friendly slogan of “Safety in Numbers” to teach consumers about the added security of EMV.
In another example, Bank Negara Malaysia, the Southeast Asian country’s central bank, drove a quick shift to EMV in 2005 to fight rampant fraud, moving 95 percent of the criminal activity to neighbors such as Thailand and Indonesia. Now, Malaysia is moving all transactions from signature to PIN by the end of 2017.
Roughly ten years after those two countries took the plunge into EMV, the U.S. is taking up the standard. Perhaps Einstein needn’t have concerned himself about everything happening at once.
Philip Andreae, Vice President, Field Marketing, Payment, North America at Oberthur Technologies
At Oberthur Technologies, Philip Andreae, Vice President, Field Marketing, Financial Services Institutions, North America, provides clients an in-depth understanding of EMV and what it takes to introduce EMV in the U.S. Over the last 20-plus years, Philip has been actively involved in the payment industry including driving the creation of the consortium that developed the EMV specification.