Following its introduction roughly 20 years ago, EMV®* chip has had a transformative effect on the payments industry. And its importance today remains just as prevalent.
With the adoption of smartphone and wearable payments continuing to evolve how we transact, and migration progressing at varying paces globally, EMV remains at the centre of the future of payments.
But before diving into what the future might be for EMV, its worth revisiting why it’s so important and how EMV came to be introduced.
Initially, EMV chip-based technology was introduced as a means to create a globally interoperable payment framework, whilst significantly increasing the security of transactions and cutting instances of fraud.
Technical body EMVCo is the driving force of this mission, developing the card and terminal specifications that define how transactions should be processed and managed by each stakeholder in the payments ecosystem. As payment technologies continue to emerge, the body is active in continuing to evolve its specifications.
The EMV Specifications support a number of cardholder verification methods (CVM) which payment systems can choose to implement, such as encrypted PIN, cryptography, online and offline payment authentication. This helps ensure that the transaction and cardholder are legitimate, an issue that magnetic stripe-only cards have for example, when they rely on easily reproduced signatures for validation.
Shifting the payments ecosystem
The introduction and subsequent rollout of EMV has been a huge catalyst in reducing payment fraud. But there are a few other notable effects which EMV has triggered:
Offline transaction management
The development of a sophisticated and secure method for authenticating transactions offline has been hugely important for the payments ecosystem. For areas with less connection, the benefits are obvious, but this has also significantly reduced communication costs across the ecosystem.
In short, this is the ability to manage both a credit and debit card, for example, on one card. For banks, this results in a reduction in issuance fees. For consumers, this means greater flexibility and fewer cards to carry around.
New business opportunities
EMV has been central to shaping a sophisticated payment industry and is enabling several new business models. In the age of mobile, contactless and wearable payments, EMV is the foundation to securing these new payment methods and enabling tradespeople and market retailers to accept these payments securely through mPOS devices. It’s also worth noting the new opportunities that are also emerging in the smart ticketing domain and EMV’s role.
The global landscape
Despite huge advances, fullEMV is still some way off. As each region battles its own complexities, the pace of adoption varies greatly. So, what does EMV migration look like globally today?
Even in mature markets who are a few years down the line in their migration, such as Europe, no region is yet 100% migrated. Europe is certainly leading, but progress is also looking good in the Asia-Pacific markets and in the U.S.
Interestingly in the U.S., initiatives such as QuickChip and M/Chip Fast have emerged in response to the scale and complexity of migration. These schemes can both reduce transaction time and assist some issuers by limiting the amount of certification testing required. With these in place, demand still remains high from banks for testing and training services to ensure that everything is working as it should prior to launch.
See the latest data from EMVCo on card-present EMV transactions globally.
Domestic payment networks are also increasingly looking to support EMV transactions within the country or region that they serve. This trend is one which is likely to continue in years to come.
New challenges are emerging
As consumers increasingly adjust to paying with a ‘tap’, payments systems are moving to introduce and advance contactless services. As each payment system currently develops its own contactless specification, however, the payment industry faces some challenges.
To manage this complexity, EMVCo is currently helping to define a universal specification and certification process. This will streamline the approval process for contactless kernels in line with the certification of contact kernels.
In a similar vein, the move to mobile and the increased adoption of wearables payments will also continue to shake up the payments ecosystem. EMV technology will be at the forefront to ensure that these advanced payment solutions can be used to make seamless, secure transactions.
Staying ahead of the curve
With these challenges in mind, it is worth remembering that EMV migration is a continual process.
The sheer volume of information, skills and expertise required transcends even the biggest processors inhouse capacity. New technologies, processes, departments and teams are all required to both establish and keep apace with the evolution of EMV.
It’s not difficult to see how the route to market can quickly become expensive, overwhelming and time-consuming.
Navigating the expert’s path to EMV
From issuers and acquirers, to manufacturers and payment schemes, EMV must be a central point of consideration to all members of the payments ecosystem.
An implementation partner such as FIME can help take the strain of navigating this complex landscape. FIME works closely with EMVCo to support the development of the EMV Chip Specifications and can ensure projects are completed quickly and successfully.
In addition, planning ahead and seeking expert advice is key to avoiding costly delays and nasty surprises. Tailored training sessions can ensure clients remain informed and equipped with the knowledge and skills they need to guarantee a successful project outcome.
*EMV® is a registered trademark in the U.S. and other countries and an unregistered trademark elsewhere. The EMV trademark is owned by EMVCo.