MAG Insights

Announcements from the MAG & Featured Articles

What's Up in Washington: Why EMVCo Should Steer Clear of Mobile Commerce (MAG Quarterly- Volume Four, Issue Two)


By Liz Garner, Vice President, Merchant Advisory Group

June 2, 2016

EMVCo – the organization that brought EMV smart card technology to the United States – has come under a great deal of scrutiny recently, including a direct inquiry from Senator Richard Durbin (D-IL) about the structure of the organization, and the effectiveness and interoperability of their technology solutions.

In a press statement [http://www.durbin.senate.gov/newsroom/press-releases/durbin-questions-whether-credit-/-debit-card-chip-technology-rollout-is-adequately-protecting-competition-and-consumers] regarding the letter, Senator Durbin notes:

“Chip technology is designed to be safer and more secure for customers, but there are significant questions about whether the deployment of this technology in the United States is adequately protecting competition and consumers.  Today I am seeking answers from EMVCo, an organization owned by six giant card networks that sets the rules for chip card technology.  I hope their answers will help clarify how security and competition in the U.S. payment card market can be further improved.”

The letter goes on to question the governance and voting structure of EMVCo, the ability of payment system stakeholders outside of the six global card brands to meaningfully participate in the EMVCo decision-making process, competition concerns with domestic debit networks not participating the same way as global brands, technology and information sharing with foreign-owned and operated companies on the Board of Managers, the decision to not more forcefully move toward the chip and PIN-enabled EMV cards similar to other countries’ EMV deployments, activities related to biometric authentication, and data on the EMV liability shift impact and debit competition post EMV transition. 

In a follow-up to EMVCo’s initial response to the letter, Senator Durbin continued to probe the organization to better understand the openness and efficiency of technology solutions being adopted by its Board of Managers. That response is available here [http://www.durbin.senate.gov/newsroom/press-releases/as-problems-and-delays-plague-transition-to-new-chip-credit-card-readers-durbin-calls-on-ftc-to-protect-small-businesses-consumers]. Senator Durbin also sent a letter to the Federal Trade Commission Chair imploring the agency to “examine how flaws and delays in the [EMV] certification process can be addressed so that businesses and consumers can be better protected from these harms.”

In many ways, one would have expected a much smoother EMV transition in the United States. After all, we’re the last G20 country to roll out the 20-year technology. However, the transition has been rife with problems for the majority of US stakeholders:

  1. The EMVCo owners created unrealistic deployment schedules for the majority of US merchants.
  2. Several businesses that have had EMV-accepting hardware in place for over a year have still not been able to get their equipment certified because there is such a backlog in the complicated certification process.
  3. Certification challenges have left many merchants susceptible to increased chargebacks and unforeseen business risks.
  4. Technology roadmaps that do not require PINs to be enabled on all EMV products leave all businesses (banks and merchants) more susceptible to fraud and chargebacks, leave merchants without a choice to include added security on all transactions where there is not a PIN available on the card product, increase the risk of fraud on counterfeit chip cards that are run as magstripe fallback transactions, make the cards less interoperable internationally, and fail to provide the strongest transaction protections for consumers.
  5. A new customer-facing default certification screen that asks the customer what type of card they’re using (for example, Visa debit vs. US debit) is creating a tremendous amount of customer confusion at the point-of-sale where merchants have rolled it out. See the MAG education piece available at: [Include Link to Member Only upload].

These are all challenges that payment system stakeholders are currently working through, and will have to continue to focus on for the foreseeable future until we make significant progress on the US EMV transition.

The major lesson learned from this transition is that EMVCo and their member companies need to spend much more time and resources toward improving the contact card EMV landscape in the United States before they shift their focus to other items, such as contactless, mobile commerce and tokenization. The rushed, and somewhat botched, EMV deployment needs to be resolved by the folks who have brought the technology solution to the US before they turn their sights to other endeavors. 

At the end of the day, my takeaway from the EMV transition is that while the EMVCo companies may have a role to play in the US transition to mobile commerce, they have absolutely no business being in the driver’s seat with all the outstanding EMV deployment problems and the ongoing lawmaker and regulator scrutiny surrounding the organization and the proprietary nature of their technology solutions.