Issuing: One Million US EMV Cards
- Visa announces that about ten US financial institutions are now issuing EMV payment cards. Among these institutions, five major banks: Wells Fargo, JPMorgan Chase, U.S. Bancorp, United Nations Federal Credit Union and State Employees Credit Union. Their cumulated portfolio exceeds one million (contact) smart cards. Also, a “significantly higher” number of issuers is offering EMV contactless Visa payWave cards.
- Both MasterCard and Visa have released EMV migration guidelines for the US. Visa’s guidebook favours a 100% authorisation request policy but lets issuers free to choose their cardholder authentication method (CAM): PIN code, signature, or neither (for low-value, low-risk transactions).
- A financial liability shift for domestic and cross-border transactions will penalise non-EMV merchants starting October 2015. This deadline has been extended to two more years for automated fuel dispensers. Acquirers, for their part, must have reached EMV-compliance by April 2013. In compensation, both networks will alleviate PCI-DSS requirements on US merchants opting for EMV terminals.
- Besides the fact that more and more US cardholders are equipped with smart cards (starting with high end customers travelling the most), merchants are also significantly impacted by these evolutions. In addition to changing their POS equipment, having people dial their PIN code will be changing their customer process. Nevertheless, PIN codes have already been adopted for debit (mag-stripe) cards. Merchants have therefore expressed their preference for this validation method rather than more complex OTPs, recommended by Visa in the long run.
- The adoption of smart cards coincides with the Fed’s decrease on debit card transactions interchange. The US regulator has introduced an incentive amount for issuers improving their fraud prevention. MasterCard and Visa, in charge of operating most domestic US transactions (with Discover, American Express and Diners) use it as a means to make up for issuers’ revenue losses. On top of reducing fraud costs, the decision to migrate the US to the chip appears well timed, since the infrastructure upgrade will partly be subsidised by this fraud prevention interchange component –resulting from an efficient lobbying by banks.
See October 2011 Insight