EMV is poised to become the next big shift in the U.S. payment ecosystem. It has already reached international prevalence, and it just needs to spread across the U.S. market in order to become the global standard in card security and operation.
What is it?
EMV stands for “EuroPay, MasterCard, Visa” — the three payment brands that founded the smart credit card standard. Administration has since fallen to EMVCo, but the standard has remained about the same.
When most people mention EMV, they’re referring to the smart card standard established by the titular companies back in the 1990s. These smart cards have integrated microprocessor chips that allow the cards to perform a greater range of functions more securely than traditional magnetic stripe cards. Smart chips store the card’s information and interact with the payment terminal in order to verify both the card’s information and the card user’s identity.
The EMV standard also allows for a new range of payment options. EMV-compliant terminals can accept both contact (card inserted, or “dipped,” in the terminal) and contactless (card tapped against the terminal) smart card payments. Additionally, EMV terminals can accept mobile wallet payments.
Most of the world has already transitioned to, or plans to transition to, the EMV standard. The United States is the last major market that has not yet made the switch. Although some smart cards have already been issued here, the majority of card-based payments are still conducted through magstripe.
Why hasn’t the U.S. switched yet?
Although many payment professionals are optimistic about what the EMV standard could do to revolutionize payments in the United States, the challenge of phasing out magstripe technology and phasing in EMV technology on so large a scale is, to be honest, quite daunting.
For one, the government has a hands-off position in the payments market. It encourages the industry to self-regulate. Therefore, there is no official legal requirement for EMV compliance in the U.S. However, the EMV payment brands (which, in this case, are MasterCard, Visa, Discover, and American Express) are encouraging the market to accept the new security standard.
MasterCard, Visa, Discover, and American Express announced their schedules for EMV conversion in the U.S. market. Although they cannot pass or enforce any laws governing smart card usage and acceptance, they do have another means of influencing the industry. By changing their liability policies for credit card fraud, they can encourage merchants and processors to make the switch by shifting card fraud liability to the least compliant party. Merchants and processors are therefore not technically forced to upgrade to EMV standards, but they have a strong incentive for doing so. The liability shift is scheduled to take place in October 2015.
The main problem the U.S. payment industry faces is the sheer scale of the market. Any transition from magstripe to EMV will require time and effort, and there will be a transitional period during which merchants will need to accept both magstripe and EMV payments in order to cater to a mixed market.
Consumers and employees will also need to be educated in the different processes and functions of smart chip cards, and payment professionals are concerned that a disconnect between magstripe technology and EMV technology will mean a slower checkout process while the market adjusts.
How do I become EMV compliant?
Many business owners are asking what they can or should do in order to become EMV compliant. The EMV payment brands suggest preparing as early as possible so you can have a functional, tested system and team come October 2015.
Host Merchant Services offers EMV solutions for business owners. If you’re interested in getting a head start on the rest of the U.S. market, contact an HMS sales representative today and ask about our EMV-compliant equipment and processing options.