Security, interoperability main drivers for EMV migration - study

Tuesday, August 23, 2011

The need to ensure security and global interoperability in the card payments industry has driven implementation of the EMV standard in Latin America and the Caribbean, according to a study by the Smart Card Alliance Latin America (Scala) chapter.

EMV - which stands for Europay, MasterCard (NYSE: MA) and Visa (NYSE: V) - is a global standard published in 1995 for interoperation of integrated circuit (IC) cards, or "chip cards," and IC card-capable point of sale (POS) terminals and ATMs, for authenticating credit and debit card transactions.

The standard is defined and managed by EMVCo, currently comprising JCB International, American Express (NYSE: AXP), MasterCard Worldwide and Visa.

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According to the Scala study - including contributions from Gemalto, GET Group, MasterCard Worldwide, Morpho, and Visa - one of the biggest incentives for EMV migration is the payment brands' liability shift mandates. Under these mandates, the party that has upgraded cards or terminals to EMV technology is protected if fraud occurs.

In addition, some financial networks have also seen the microchip's incorporation as an opportunity to add services, rather than as an additional infrastructure cost.

According to EMVCo, some 1.2bn EMV cards have been issued globally, and about 18.7mn POS terminals accept EMV cards.

In Latin America and the Caribbean, Visa announced a milestone of 100mn EMV cards issued in Brazil, the region's largest market. Other countries in the region such as Colombia, Mexico and Venezuela have also seen growing card numbers.

Countries that have started adopting the EMV standard are seeing a decline in card transaction fraud rates and an improvement in card services, the study found.

But the main challenges are "budget constraints and lack of knowledgeable resources," the study reads.

But these inhibitors to EMV migration have started to decrease. In fact, some markets in Latin America and the Caribbean have started developing their own versions of EMV chip card solutions, such as the national PKI scheme ICP-Brasil, offline EMV payments implemented by Brazilian card acquirer Cielo, and solutions adopted by retailer Pão de Açúcar.

And Mexico's BBVA Bancomer, the local unit of Spanish banking group BBVA (NYSE: BBVA), has also chosen this technology for its advanced loyalty program Puntos Bancomer.

These implementations are examples of the opportunities provided by EMV chip cards to address market needs in a more cost-effective and secure manner, according to the study.