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The U.S. is moving toward EMV...at last!

Visa announcement of "Plans to Accelerate Chip Migration and Adoption of Mobile Payments" may be the catalyst for the U.S. market to adopt EMV.

August 9, 2011 by Lachlan Gunn — Director, BenAlpin Ltd

In April in a blog on this site I asked the question 'Is the U.S. market tipping towards EMV?'. In it I pointed out that two of the largest U.S. banks had announced that they were starting EMV card pilots, and wondered when the tipping point for the U.S. market would be reached. Well it seems that it may have arrived. Yesterday Visa announced its plans to accelerate chip migration and adoption of mobile payments. Most importantly a date, October 1, 2015, has been set for the implementation of a liability shift. This is a major step for the U.S. market, although it is 'catch-up' as most of the rest of the world has already taken it, following a lead set by Europe.

What has driven Visa to take this step? My guess is two reasons: The first is that fraudsters engaged in card skimming have increased activity in the U.S., practicing techniques honed in other parts of the world before and during the shift towards the EMV. In their 2010 European ATM Crime Report, EAST reported that European skimming related losses had fallen again, with an increasing proportion of these losses occuring in other parts of the world, particularly the U.S. I can only speculate how much U.S. skimming losses must be rising as the fraudsters migrate there. Secondly, the holders of U.S. stripe only cards are increasingly unable to use their cards for transactions at chip only terminals in other parts of the world.

What does the proposed liability shift mean? I quote from the Visa press release:

Visa intends to institute a U.S. liability shift for domestic and cross-border counterfeit card-present point-of-sale (POS) transactions, effective October 1, 2015. Fuel-selling merchants will have an additional two years, until October 1, 2017 before a liability shift takes effect for transactions generated from automated fuel dispensers. Currently, POS counterfeit fraud is largely absorbed by card issuers. With the liability shift, if a contact chip card is presented to a merchant that has not adopted, at minimum, contact chip terminals,liability for counterfeit fraud may shift to the merchant's acquirer. The liability shift encourages chip adoption since any chip-on-chip transaction (chip card read by a chip terminal) provides the dynamic authentication datathat helps to better protect all parties. The U.S. is the only country in the world that has not committed to either a domestic or cross-border liability shift associated with chip payments.

Notably, ATMs are not mentioned, although such a liability shift does exist for ATMs in Europe. Still, the Visa announcement is an important first step for the U.S. market and clarifies the technology that merchants, banks and financial institutions can now start to invest in with confidence. Of course EMV does not remove all counterfeit risks from a card, as Europe knows only too well. For that to happen, cards must become chip only, with no active magnetic stripe.

Maybe as the U.S. starts to shift toward EMV, magnetic stripe removal from EMV payment cards will become more and more common? Here's hoping...