The Expert's View

EMV is Coming to America

Survey: U.S. Market is Ready for Chip & PIN

While it's been a long time coming, it looks like the Europay, MasterCard, Visa security standard is finally headed for the U.S. market. In a recent Aite Group survey of 76 card security risk management executives, the majority of respondents said they believe EMV will come to the United States sometime in the next five to 10 years. The survey also tracked emerging bullishness relative to EMV's prospects.

When Aite Group asked a similar population the same question in 2009, 36 percent believed that EMV would never make it to the United States. Today, only two years later, the portion that doubts EMV's chances is down to 17 percent.

Fraud losses will not be the driver of EMV in the near term, given that credit card fraud losses have been flat over the last few years. The international travel use case is one factor that has opened the door to EMV. The market has seen a number of announcements regarding EMV cards being rolled out to selected populations of U.S. cardholders who travel internationally, since cards with only a magnetic stripe have become increasingly difficult to use in non-U.S. jurisdictions.

More than 2.5 million cards are expected to be issued in 2011 for this reason alone. This gives issuers an opportunity to dip their toes in the water and get some deployment experience; since the initial infrastructure investment will already have been made, this makes the business case less onerous, should issuers decide to deploy EMV to a broader portion of their customer base.

Another significant impediment to EMV has been signature-debit interchange fees, which have been significantly higher than PIN-debit interchange fees. Issuers have worked hard to maximize the volume of transactions that are transacted without a PIN. The price differential will disappear in the aftermath of the Durbin amendment, and with it one more obstacle to the U.S. market migration to EMV.

Get ready for some extra bling in your wallet, and not the kind that sticks to the back of a phone; it looks like shiny new chips are coming our way.

McNelley is a senior analyst at Aite Group LLC who covers banking and payments fraud. She has more than a decade of hands-on product management experience working with financial institutions, payments processors and risk management companies.

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