Page 102 - Pay Magazine s2014

100
finance & strategy
the emv experience:
Focus on Prepaid
Card issuers get serious about emv migration as 2015 liability shift nears and fraud risks threaten reputations.
By Kate Fitzgerald, Emerging Payments Editor
The tide turned sharply this year for the U.S. payments card industry’s EMV migra- tion, changing from a holding pattern to serious action plans.
When U.S. payments networks in 2012 announced EMV liability shifts going into effect in October 2015—to encourage chip card adoption—many issuers and mer- chants were circumspect about their plans. The expense and technical requirements to convert millions of cards and terminals
to EMV from magnetic stripe technology looked daunting for businesses clawing out of a recession.
But the atmosphere changed in 2014, with the liability shift nearing and the alarming news of several major data breaches focusing at- tention on the need to modernize. Suddenly, a broad cross-section
of payments industry players be- gan firming up EMV migration
plans, with strategies unfolding separately for credit, debit and prepaid card portfolios.
What’s sparked many issuers to action is the potentially costly financial—and reputational—risk of sticking with older card technol- ogy. As fraud risks rise, consumer surveys are registering growing concern about fraud exposure, and the investment community and lawmakers are calling for improved payments security. “The risk is rising and fraud rates are going to increase for those not on the EMV ship. It’s about protecting reputa- tion and brand,” Martin Ferenczi, Oberthur Technologies president, North America, tells Paybefore.
EMV’s chip-based technology plays a key role in blocking counterfeit card fraud at the POS by generating a unique cryptogram with each trans- action. As the last major global mar- ket to adopt chip card technology, payments industry security experts
believe the U.S. is more vulnerable now to card fraud, especially following prominent data breaches within the last two years.
It’s understood that widespread adoption of EMV won’t eliminate fraud—including online card fraud —or prevent general data breaches. But the presence of a chip is a strong deterrent for thieves using stolen card data at the POS, experts believe. “The value of stolen card data to fraudsters is diminished with EMV,” Ferenczi remarks.
“Card security is about layers. The fraudsters will look elsewhere when there is an EMV layer.”
Tipping Point
The combination of these factors created an EMV “tipping point” this year for all card issuers, ac- cording to Steve Sievert, executive vice president of marketing and communications for Discover Financial Services’ PULSE network. In PULSE’s 2014 Debit Issuer