The Future Of Cashless With EMV

by MEI Cashless Product Manager
MEI Cashless Product Manager
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on July 18, 2013 in Cashless | 0 Comments

In the vending industry, operators are focused on making the vending experience comparable to that of a retail store experience. Cashless acceptance has exploded over the last few years, as operators strive to accept whatever form of payment consumers have in their pocket.  Operators have enough to worry about when it comes to cashless – interchange rates, monthly communication fees, what hardware to buy…not to mention maintaining their cashless devices to ensure maximum uptime.

Just when things couldn’t get any more complicated, we all woke up on August 9, 2011.  This was the date When Visa made the announcement that everyone knew was coming.  EMV and chip card based payments are coming to the US.  Ever since that day in 2011, there has been a lot of buzz in the payment industry regarding EMV.  What is it? When is it coming? When will banks start issuing chip cards?
 

 


Will this announcement by Visa disrupt the vending market?
 


What is it and why haven’t I heard of it?

EMV is a global standard for credit and debit cards based on chip card technology.  The acronym stands for EuroPay, Mastercard, and Visa – the three entities who collaborated to create the new technology and the new standard, back in 1994!  EuroPay was a card brand that became part of MasterCard in 2002.  The other major card brands, American Express, JCB, and UnionPay have all since joined EMVco and collectively they define the EMV standards for chip based payments worldwide. The first EMV Specification was published in 1996 and EMVco is critical in ensuring interoperability between cards and terminals globally in addition to defining and overseeing the testing processes that terminals and cards have to be put through.



The goal of this technology was to create a more secure method of payment to reduce losses associated with counterfeiting, fraud, skimming, etc that is currently alive and strong with the old magnetic stripe cards we all have in our wallet.  Have you ever had someone steal your card number and use your card in some random store that you’ve never been to – the goal of EMV is to enhance security of cards and card readers to minimize losses due to credit card fraud. The reason you haven’t heard of EMV previously is likely due to the fact that the US market still uses magnetic stripe technology and has not migrated to EMV technology.  Hence the August 2011 announcement by Visa to accelerate chip card (EMV) acceptance in the United States.  Shortly after Visa made this announcement – MasterCard, Discover, and American Express also made similar announcements. EMV is coming!!



How it works
 


EMV comes in two flavors – contact and contactless.  A contact EMV card looks identical to a magnetic stripe credit card, except that there is a silver/gold plate on the front of the card.  The plate is actually a microprocessor, basically a mini-computer, that holds all kinds of information loaded by the card issuer.  An EMV transaction takes place when the chip on the card makes contact with a chip card reader – found within an EMV capable card reader/terminal and of which occurs when the card is inserted (not swiped) into a terminal.  The card is authenticated by the card reader and generates a unique cryptogram, per transaction, that is validated during processing.  Unlike a magnetic stripe card where the card data is statically located on the magnetic stripe, the data transmitted in an EMV transaction is dynamic.



The other flavor of EMV is contactless. Similar to other NFC credit cards found in the market today, this type of EMV card is embedded with an antennae and chip that is read by the card reader when it is placed within close proximity to the reader.  Contactless EMV cards are different from their mag stripe equivalents in the US in that they incorporate EMV security elements as part of their interaction with the card reader when the card is tapped.  A dual interface card is one that includes both contact and contactless functionality.

The Future of EMV in the US?
 


EMV is already widely used worldwide. As of Q4 2012, there are roughly 1.62 billion EMV cards in consumers’ hands that have been issued by banks globally. Combine this with the 23.8 million terminals that have been deployed throughout Europe, Asia, Latin America and Africa and it’s easy to see that this technology is well established and poised to spread even further. Currently, the United States is the largest market that has not transitioned from magstripe to EMV. With the 2011 announcement, Visa is requiring that card processors, gateways, and acquirers upgrade their systems to support processing of EMV transactions.  They are also recommending that merchants upgrade their card readers to accept EMV cards and process EMV transactions by October 2015.  Understanding costs associated with changing out POS terminals and other related hardware, likely the transition from magstripe readers to EMV capable readers will be slow and definitely no faster than new card issuance. 



Many industry experts are standing by to see how EMV takes shape in the US. There are many unanswered questions and details that need to be flushed out before many retailers, operators, and merchants make business decisions.

 

1. What types of cards that the banks will issue (contact, contactless, or dual interface)?
 

2. When will the everyday consumer have an EMV card in their wallet?
 

3. What card holder verification method will be required (signature or PIN)?
 

4. Will I need to purchase new hardware and if so, when does it make sense to do so?
 

5. What’s the ongoing risk of accepting magstripe?

From a vending perspective, the transition to chip card readers from magnetic stripe (swipe) readers in the US will depend on getting answers to many of the above questions.  As a leader in cashless hardware, MEI has incorporated EMV support into our newest bezel family – EasiChoice.  The EasiChoice 5 bezel accepts cash, coupon, magstripe, contactless (EMV and traditional), and contact chip cards in a single compact device.  EasiChoice bezels can be found in the Australian, European, and Canadian markets today, advancing payment acceptance with the changing technology in consumers’ wallets.

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