Wednesday, August 10, 2011

US EMV is a no brainer for Visa

On August 9th, 2011 Visa announced plans to accelerate the migration of EMV contact and contactless payments in the US. With this move Visa aims to be at the center of the US consumer buying experience. The solution has three main steps:

The company is expanding its Technology Innovation Program (TIP) to eliminate the merchant requirement to annually validate their compliance with the PCI Data Security Standards. To qualify merchants must have at least 75% of their Visa transactions originate from the chip-enabled terminal. The terminals must have both contact and contactless chip acceptance including mobile contactless payment. This is designed as an incentive to increase security and NFC (Near Field Communication) capability.

Visa’s U.S. acquirer processors and sub-processors service providers will be required to support merchant acceptance of chip transactions no later than April 1, 2013. This will require service providers to carry and process additional data associated with the chip transaction.

Visa intents to shift domestic and cross-border counterfeit card-present point-of-sale (POS) transactions effective October 1, 2015 and for fuel-selling merchants October 1, 2017. This is for merchants who have not adopted at minimum, contact chip terminals.

EMV will improve security by not allowing stolen cards to be used via dynamic authentication, preventing cloning of cards which can be done via magnetic stripes, and minimizing the attractiveness of hacker attacks on databases which store credit card information. Without the capability of cloning hackers will have less incentive to hack data bases for credit card information.

The other play is to increase usage of mobile payments. Visa plans to use mobile as a way to provide enhanced services and create loyalty. Visa can use the smartphone to be at the center of the customer’s payment and money transfer experience. Visa will also use smartphones to create customer specific ads and coupons to increase purchasing and card loyalty.

US EMV is a no brainer for Visa as it will:

- Reduce fraud via stolen credit cards and hackers

- Increase their customer loyalty and value via customer discounts presented on smartphones (making them more important in the customer buying cycle)

- Make it easier for U.S. cardholder to use their Visa cards overseas

- Increase efficiencies with one main POS system around the world

- Make other smartphone transactions like remittance and peer to peer payment more acceptable as customer will have experience using the smartphone to pay for goods and services

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