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volume 8 • spring 2015
PrEPaid EMV UPdatE
The business case for prepaid card issuers considering their EMV strategies may differ sharply from one portfolio to another. Closed- loop, gift and incentive cards are unlikely to require EMV. But, prepaid cards routinely used for purchases and those carrying a balance above a certain threshold are prime for conversion to the chip-card standard, security experts note.
Not every prepaid card issuer
will decide to implement EMV immediately, suggests Joyce Brennan, FIS’s head of solutions design for prepaid cards. “Prepaid is too broad an industry to have
a single standard of adoption for EMV,” she says. “Some lower-risk prepaid card sectors may decide to wait to adopt EMV, while issuers of GPR and other reload- able products, such as payroll cards, are more likely to go with EMV now.”
U.S. EMV-CaPablE PoS tErMinalS ForECaSt
92% by 2018
53% in 2015
source: Javelin Strategy & Research
goal of equipping “a significant portion” of cardholders with EMV by October 2015, according to a Discover spokesperson.
American Express Co. has been upgrading its U.S. payments card base to the EMV standard steadily in the last two years, according to Karen Czack, vice president, global chip products.
Government-issued payment
cards also are going the EMV route. Following high-profile
data breaches in 2013 and 2014, President Obama on Oct. 17 signed an executive order mandating chip and PIN for all government credit, debit and prepaid cards, including the U.S. Treasury Department’s Direct Express prepaid cards for federal benefits recipients issued by Comerica.
Merchants: A Mixed EMV Bag
Merchant awareness and prep- aration for the U.S. EMV migration is another story, with readiness varying widely based on the size and type of business. Unsurpris- ingly, large U.S. merchants are
at the forefront of EMV compli- ance, but smaller and midsize merchants run the gamut in their EMV readiness, according to Raymond Moorman, director of product and EMV solutions at Mercury Payment Systems, which Vantiv acquired last year.
The smallest retailers—those with one or two locations—are position- ed to convert to EMV in a timely fashion, if they choose to do so,
because the system conversion is usually relatively simple, he notes. But for millions of midsize mer- chants—those with several to a few dozen locations—upgrading can be more difficult if they rely on a net- work of integrated payment termi- nals with customized processes. Making core changes requires costly reconfiguration, Moorman says. And many of these midsize merchants lack deep resources for overhauling their payments infrastructure and may not see a need to make the switch this year, he suggests.
Retailers’ merchandise categories also may dictate the urgency
of a shift to EMV, Moorman adds. Merchants selling higher-risk items, like electronics and jewelry, that face higher fraud risks may hurry to make the switch, whereas smaller merchants with recurring transactions in low-risk categories may not.
Many owners of small and midsize stores are still unaware of the U.S. chip-card initiative and the liability shift or aren’t making it a priority, but payments networks are working to change that. American Express conducted a survey of small- business owners late last year and found that more than one-third either don’t plan to upgrade their terminals or haven’t decided whether they will.
To spread the word about EMV and its benefits, American Express established a roving Fraud Squad team to visit small merchants in major U.S. cities and provide EMV
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