Now that both Visa® and MasterCard® have set April 2013 as the target date for the support system for EMV cards to be up and running in the U.S., a lot of people may be wondering what effect it’ll have on credit card processing here. No one knows for sure how the transition from magnetic stripe to chip-and-PIN will go, but no one is predicting a disaster scenario of Biblical (or even Y2K) proportions.
Good news first: The basic credit card transaction process will remain pretty much the same as now for merchants and customers alike. If anything, it will resemble a PIN debit transaction. The EMV card will be swiped through an updated terminal or cardreader equipped with a chip that can verify that the card is legitimate. The cardholder will then enter their PIN on the keypad, the second verification step needed to complete the transaction.
A number of U.S. banks and credit unions are already issuing EMV cards, primarily to customers who live or travel frequently abroad and have encountered problems using their mag stripe cards in countries where EMV is the gold standard. The rest of us will receive new chip-enabled credit cards prior to the switchover date.
Up until now, conventional wisdom was that the U.S. lagged behind the rest of the world in adopting EMV technology for two reasons: banks wanted to avoid the expense of issuing the new cards until merchants were ready to process them, and merchants didn’t want the expense of updating their terminals until more customers were using the cards. This stalemate was broken in 2011 when Visa and MasterCard announced within weeks of each other their intentions to accelerate the migration to chip-and-PIN cards.
Several reasons have been cited for this about-face by the credit card giants. First, EMV technology is widely accepted as being more secure than mag stripe technology, mainly because of the microprocessor chip embedded in the card and the use of dynamic authentication, which assigns dynamic values for each transaction. The chip makes it much more difficult for thieves to “skim” a card, which involves copying its mag stripe and cloning the card for illegal use. Even if the payment card data is compromised, a counterfeit card would be useless at the point of sale without the presence of the card’s unique elements.
Another reason the credit card companies are keen to transition to EMV is that it operates on the same NFC (near field communication) technology as the mobile payment systems currently being tested in this country. “As NFC mobile payments and other chip-based emerging technologies are poised to take off in the coming years, we are taking steps today to create a commercial framework that will support growth opportunities and create value for all participants in the payment chain,” confirmed Jim McCarthy, global head of product at Visa, when the company made its announcement last August.
Some bumps along the way are inevitable as U.S. credit cards transition from mag stripe to chip-and-PIN, but the credit card processing industry is too invested in this switch not to make it work.
