The introduction of chip-based credit cards and mobile transactions are gaining momentum in the U.S.
Editor’s note: This article is provided for your information by Veracity Payment Solutions, provider of the American Rental Association (ARA)-endorsed Merchant Services Program. Find more information on this program for ARA members at ARArental.org. Click on the “Members” tab, then “Business Resources.”
In the payment processing industry, EMV — the abbreviation for Europay, MasterCard and Visa, a global standard for inter-operation of integrated circuit cards — is on the lips or in the minds of just about everybody as the introduction of this global standard for chip-based card and mobile transactions is gathering momentum in the U.S.
EMV has been used widely around the world for years. As the U.S. catches up with this capability, there likely will be huge changes for the better in the landscape of payment acceptance and beyond. Not only will security be vastly improved, but the ease and speed with which transactions can be authenticated — both online and offline — will help enhance the convenience for shoppers, changing the face and pace of credit card usage and acceptance.
Here’s a quick EMV primer:
EMV is not a technology itself; it is a global standard for chip-based payment cards and acceptance devices, first introduced in 1994 when Europay, MasterCard and Visa formed EMVCo, the EMV development and standardization organization. These standards dictate:
- The physical nature and capabilities of the chips.
- The format of the data and applications they host.
- The way they interact with point-of-sale and mobile devices.
Very basically, chips are operationally “live” in the sense that they are energized by the terminals they interact with. They generate a unique, dynamic authentication cryptogram for each transaction, making it more difficult for fraudsters to copy. They’re usually used with a PIN (“Chip-and-PIN”) for enhanced security.
The long-term goal is to replace all magnetic stripe or “magstripe” cards with chip-based payment card technology. Definite strides have been made in EMV since its inception in Europe:
- The standards have gone through several iterations.
- Migration is accelerating worldwide.
- The technology has been refined for use in both contact (swipe) and contactless payment cards (near field communications).
- EMV is being built into mobile devices.
- More compliant, chip-based cards are being issued by banks.
There are three key drivers behind EMV adoption: security, versatility and mobility. While the switch hasn’t happened on a large scale in the U.S. yet, it is coming.
A number of factors have conspired to drive the migration to EMV:
- Continuing growth in the U.S. of card fraud — expected to cost around $10 billion by 2015.
- Cross-border payment difficulties where the old magstripe technology encounters the new chip technology.
- The exponential growth in mobile technology used for making transactions.
- Processors were given until April 2013 to be fully able to process chip transactions, while merchants have until October 2015.
Migration to EMV is an immediate challenge everyone faces. Upgrading point-of-sale (POS) equipment and making transitions seamless all over the country is a tall order. A clear, thought-out plan is crucial and rental store owners are encouraged to start planning for the migration to EMV now.
Veracity Payment Solutions, Moline, Ill., for example, has put forth an effort to keep pace with technological and logistical opportunities. The company can be used as a resource to help equipment rental stores make decisions about upgrading or replacing equipment, can help equipment rental stores make the transition and will work with equipment rental stores in the months to come, so that rental stores will be ready and able to embrace EMV.