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MAG Sponsor Spotlight: Maximizing Your Choice in Contactless Payments (MAG Quarterly- Volume Three, Issue Four)

By Terry Dooley, Executive Vice President and Chief Information Officer (CIO), Shazam

December 8, 2015

There’s been a tremendous amount of discussion surrounding EMV and the common AID, and rightfully so. In a highly competitive marketplace of more than eight million merchants and 17,000 financial institutions, multiple stakeholders collaborated to create a solution that helped maintain competition, routing choice and compliance with Regulation II. 

The common AID will prove vitally important in the coming months as more merchants migrate to EMV. It may prove even more important as we look towards the future of mobile payments using our phones as a payment option. 

As part of the migration to EMV, the major credit networks required debit networks in the US to license the ability to use chip technology.  This action essentially required a network to license a set of technologies from a competitor. The license agreement included both contact and contactless technology. This means merchants CAN maintain routing choice and flexibility IF supporting NFC deployment properly.  That’s more complicated than it sounds.

It’s critically important to understand how to maintain routing choice in a contactless transaction. First, your terminals must support the common AID. Second, the mobile device must be provisioned with the common AID. In the majority of cases, NFC doesn’t support the common AID at the terminal. Equally important, the common AID isn’t provisioned as part of a card load into a mobile wallet. Most merchants view NFC as just another version of EMV, but the technology is coupled with proprietary technology applications that can affect routing choice. 

So if you want to accept more contactless transactions or you’re thinking about buying new terminals, there are a few things to consider: 

• Is my terminal EMV contactless ready vs. the existing magnetic stripe contactless in use today? If the answer is no, you may not have a choice in which path the transaction is sent for authorization. If the answer is yes, make sure your terminal manufacturer and acquiring partner deployed the terminal so it will support the selection of the common AID.

• Issuers and their merchant partners should be asking if mobile wallets and payment solutions are supporting the provisioning and loading of the common AID onto their mobile devices.  This will allow merchants and issuers routing choice and flexibility. If the common AID is NOT part of a mobile device’s provisioning process, then choice is limited to the proprietary solution on the card. As it stands today, NFC forces an issuer or merchant to use routing that doesn’t offer the competitive choice or flexibility granted to you through Regulation II. 

Tokenization offers another new security solution and, with it, a unique challenge that limits routing choice. There are a limited number of organizations that can provide token provisioning, vault and token services.  Major global brands use EMVCo framework as the tokenization standard. But EMVCo isn’t an open standards organization. EMVCo defines a framework, in which proprietary solutions are deployed on top of and are unique to each implementation. EMVCo solutions don’t follow the open standards of independent third-party organizations like ISO or ANSI. This allows the owners of EMVCo the luxury of influencing implementation of the framework and who benefits from it. 

Deployment and implementation of contactless payments won’t look the same as contact EMV. Existing implementations of contactless payments are already plagued with challenges. Merchant deployment, consumer adoption and making a business case to support the investment all equal lagging acceptance. So, can merchants convince consumers that paying for something with a phone is easier than paying with a card?  Ease of use varies from merchant to merchant. The technology is certainly trendy, but trends don’t always survive for the long term. As multiple generations see and experience this new technology, the question is, how much influence will younger consumers leverage and how will that drive change?  Whatever the road ahead looks like for NFC and tokenization, maximizing your routing choice and flexibility gives you the tools to meet consumer demand.