Smart Card Alliance Annual Conference Day One – EMV and the United States

Smart Card Alliance Annual Conference Day One – EMV and the United States

Smart Card Alliance Annual Conference, May 4, 2011, Chicago–U.S. credit card issuers considering EMV bank cards for their international traveler customers should be very encouraged based on the results of the first U.S. EMV issuer, the United Nations Federal Union (UNFCU), presented at the Smart Card Alliance 2011 Annual Conference taking place this week in Chicago.

“We’ve never seen numbers like this before,” said Merrill Halpern, assistant vice president card services and the driving force behind the UNFCU program. He reported customer satisfaction with the program is very high, and that new account applications are up 158 percent, new credit line requests are up 382 percent, existing line increase requests are up 275 percent, revolving balances are up 20 percent and purchases are up 18 percent, compared to the prior period. Halpern attributed the growth to the EMV chip UNFCU now offers on its Elite credit cards, which have rapidly become very popular with the international travelers who make up much of the credit union’s members.

The main focus of the payments track at the conference is the U.S. evolution to EMV credit and debit cards. Toni Merschen, the former group head of chip for MasterCard international and now principal of his own consulting firm, directly refuted what he called the “myths” about EMV – popular, but inaccurate, opinions held by many U.S. bankers.

Myth number one is that EMV does not work. “Not only does it work, contrary to everything else out there, EMV actually prevents fraud. Everything else is after the fact,” said Merschen, citing fraud statistics from EMV countries. Myth number two is that there is no business case. He stated there is a clearly positive business case, basing his position on Visa studies that show fraud management costs are at least as high as direct fraud losses, and that the opportunity cost, including behavior changes in fraud victims, adds another 15 percent to the true cost of fraud.

Merschen also reported that the European Payment Council (EPC), which is the voice of European banks, is now supporting the Single Euro Payments Area (SEPA) recommendation to remove magnetic stripes from bankcards in Europe. EPC has passed a resolution asking European payment scheme operators to give banks the option to remove magnetic stripes from the cards, making them chip only. They also requested the right to refuse magnetic stripe transactions. A second resolution proposes that all Card Not Present (CNP) transactions including Internet payments be strongly authenticated before the end of 2013. These moves have significant implications for U.S. issuers that only issue magnetic stripe cards and do not provide customers with the ability to strongly authenticate e-commerce transactions.

The leading U.S. merchant in EMV implementation is Walmart Stores, Inc. Jamie Henry, senior director Payment Services, told attendees Walmart is implementing EMV globally including the UK, Canada, Mexico, Brazil and the United States. In the U.S., 100 percent of terminals now accept chip cards and they are rolling out the software. “We see 200 million customers a week so if you’re looking for a place in the U.S. to use your EMV chip and PIN card, Walmart will be ready,” said Henry.

Henry expressed Walmart’s commitment to U.S. EMV migration and encouraged the industry to move forward. “Let’s get rid of the mag stripe and adopt the global standard,” said Henry. He also advocated leveraging lessons learned and best practices from other EMV implementations around the world. “Let’s make the most out of being last”, he said.

Looking at the long term payments market, Dave Birch, director Consult Hyperion, said, “Everyone knows the endgame is mobile. What you need is a plan to get there.” Birch presented his version of a roadmap, and stressed it is important to ultimately converge all of the technologies and standards – contactless, EMV and NFC – and to get it right for all of the stakeholders.

The Federal Reserve Bank agrees. Richard Oliver, executive vice president with the Federal Reserve Bank of Atlanta and the retail payments product manager for the Federal Reserve System, began working with his colleagues in the Boston Fed in 2010 to convene the Mobile Payments Industry Forum. The organization is working to bring together all of the stakeholders to discuss and help define the characteristics that would be necessary to successfully implement mobile payments. The organization recently published a mobile payment white paper that captures the content of discussions from the several meetings that have taken place, indicating where there is consensus and where there are differences of opinions. Notably, Oliver reported there is a consensus that it is absolutely critical to emulate the EMV experience as we move to mobile payments, with global standards, rules and clear regulatory authority. Setting up a formal organization to define and manage the approach to mobile, however, is not a proposition to which all parties in the discussions agreed.

All of the presenters at the Alliance conference raised the significant problem of CNP fraud with Internet payment, and the potential to use EMV chip cards to strongly authenticate ecommerce purchases as a solution. Hyperion’s Birch said he can envision a scenario where CNP fraud gets so bad in the United States that banks start to issue EMV cards just to use them to secure CNP transactions, even if there are no EMV-ready payment terminals installed in U.S. merchants.

Countering the massive problem of stolen credit card information from data breaches is another benefit of migrating to EMV. EMV makes stolen credit card information useless, because every EMV transaction carries dynamic data and that prevents fraud. By using EMV cards and individual readers to authenticate Internet transactions, as 30 million Europeans already do according to Merschen, you can prevent CNP fraud on the Internet, and that would remove the value to cyber criminals of stealing credit card numbers.

“If you cannot prevent credit card data from being stolen, you need to make it useless. And it should be clear to everyone you can’t prevent that data from being stolen,” said Merschen.

The Smart Card Alliance Annual Conference continues May 4th and 5th in Chicago. An audio recording of the presentations from the conference will be available for purchase late next week at

About the Smart Card Alliance

The Smart Card Alliance is a not-for-profit, multi-industry association working to stimulate the understanding, adoption, use and widespread application of smart card technology.

Through specific projects such as education programs, market research, advocacy, industry relations and open forums, the Alliance keeps its members connected to industry leaders and innovative thought. The Alliance is the single industry voice for smart cards, leading industry discussion on the impact and value of smart cards in the U.S. and Latin America. For more information please visit