Plastic payment cards driven by magnetic stripe technology are soft targets for fraudsters today. Continued reliance on them has increased the degree of risk for banks, as these cards are more susceptible to fraud than ever before. Attracted by the high degree of security and sophistication offered by chip-based card technology, financial institutions in several countries across Europe, Asia, Africa, and South America have adopted this technology and transitioned to the global interoperability standard governed by EMVCo. While the US payments industry has so far resisted migration to chip-based payment cards, global payment networks have announced imminent changes in their liability shift policies to drive EMV infrastructure adoption. The looming compliance deadlines mandated by global payment networks are forcing issuers and acquirers to fast track EMV migration.
Global Payment Card Landscape
The global payment card landscape is witnessing rapid changes with the magnetic stripe card technology that served the industry for many decades gradually being phased out in favor of the more sophisticated chip card technology. Chip cards offer superior security features such as foolproof card authentication, remote cardholder verification, robust issuer institution authentication, and offline transaction authorization based on predefined rules. As a result, the shift to chip technology has proceeded at a swift pace in many parts of the world, driven by the need to protect against an increasing number of fraud incidents.
An Integrated EMV Approach is the Need of the Hour
With the introduction of tokenization and sophisticated identification and verification processes, the opportunities in the mobile proximity and remote payments space look promising. Banks need to put in place an integrated EMV and tokenization strategy encompassing face-to-face transactions, remote mobile payments, and e-commerce transactions. Such an integrated strategy should incorporate the following:
- EMV strategy for contact card or contactless card in a traditional PoS environment, device life cycle, and provisioning
- EMV strategy for contactless proximity transactions powered by mobile devices equipped with near field communication technology, over-the-air (OTA) personalization, and remote post-issuance management
- Tokenization process as per EMVCo specifications
- Third-party ecosystem players (like Apple Inc.) carrying out identification and verification (ID&V) along with device provisioning of account credentials in the EMV environment
- Remote online payments with secure authentication
- Online digital wallet transactions that use tokenization and third-party authentication
Benefits of an Integrated EMV Approach
A holistic EMV program offers multiple opportunities to banks. One such is the ability to combine cross-industry initiatives such as loyalty applications for the retail industry, transit payment applications for the transport industry, luxury club services for the hospitality industry, and student-centric applications for the education sector.
So far, financial institutions have largely viewed EMV implementations as a compliance exercise, and apart from countering fraud, have failed to realize other business benefits. Such a myopic focus can potentially impact the competitive position of banks in this rapidly changing landscape. Some common challenges that are encountered during the initial strategy definition, right up to the implementation phase, are:
- Narrow focus on compliance
- Inaccurate design of personalization solutions available in the market
- Need for maintaining multiple network specific applications
- Fragmented infrastructure
- High cost of authentication mechanisms
- Lack of long-term planning
Disruptive technologies are revolutionizing the payment landscape. Many agile third-party players with differentiated products and services on offer are making way into the ecosystem. In addition, global payment networks are driving a shift to EMV standards to reduce fraud liabilities. Banks need to proactively respond to such changes to retain their competitive position. Most financial institutions so far, have approached the EMV implementation programs with a myopic focus, tending only to the mandatory requirements to achieve basic compliance. This mindset, however, is not productive in the longer run, since every subsequent compliance mandate will thereby require an implementation ‘top-up’. Such an ad hoc strategy is not the best use of an organization’s time, effort, and money – an integrated EMV strategy is thus the need of the hour.