Europay, MasterCard, Visa
EMV cards, also known as smart cards, were developed, backed and branded by four of the major card brands. First implemented all across Europe, the cards rely on an imbedded microchip to send and receive payment data with a merchant’s EMV-enabled terminal or POS system.
The chips, only about 3 by 5 mm in size, transmit unique numbers to the payment processors each time the cards are used. This increases the security since the customers’ name and signature are not used and never stored. Making the chip-based cards unaffected by breaches like the one Global Payments experienced earlier this year.
These cards have been used in Europe for more than a decade and have appeared in Canada as recently as two years ago. So what’s holding the United States up? That’s right, you guessed it, the price tag. Javelin Strategy & Research estimates the cost of deployment for EMV in the U.S. at about $8.6 billion. The major card brands, however, have decided to make the push from the current magnetic strip standard, to the more secure form, EMV.
AmEx joins the club
In late June, American Express announced that it would be joining Visa and MasterCard, in requiring the chip-based cards. Visa began an aggressive push last year for EMV cards; the company claimed more than a million of the cards were in circulation at the end of 2011. AmEx, however, will require they be implemented in April 2013, instead of the 2015 mandate set by Visa and MasterCard.
You may find yourself asking, at such a large implementation cost, are EMV cards really worth it? The answer is yes! The savings comes in the form of decreased fraud. The chip-embedded cards are much harder to duplicate than their magnetic strip enabled counterparts. Criminals can modify or replace the information on mag-stripe cards easily. Where as the signals EMV cards give off, cannot be duplicated.
Fraud in the United States amounted to more than $3.56 billion in 2010. Globally, the U.S. contributed to about 27% of payment-card purchases, yet accounted for 47% of global payment-card fraud. A highly unfavorable ratio, in my opinion.
In summary, EMV cards are coming to the U.S. whether merchants want to accept them or not. The cost to implement them may cause a bit of a sticker shock, but the long-term benefits of virtually eliminating card fraud heavily outweigh it. The decreased fraudulent charges will eventually translate into more savings for you, the merchant