What Everybody Has To Know About EMV
By Gene R. Michaud, CEO, tGrowth Solutions dba Orbit Retail
"EMV is quickly becoming a new acronym for the U.S. market, which everyone will be using, and it will have a major impact on our technology life style."
That is a strong statement for a few letters, whose primary intent was improving the security of credit cards and lowering credit card fraud for financial institutions and the payment processing industry. However, when we start to look at the side benefits that will result as this program expands into the U.S., we then can start to understand why the statement is true.
What is EMV? It is a standard for globally interoperable, secure payments. The key element of EMV involves including dynamic digital data in every transaction. This makes these types of transactions extremely secure and reduces the risk of fraud. Europay, MasterCard and Visa, to ensure global interoperability for chip-based payment transactions, developed the EMV standard. The intended process was to create credit and debit cards with embedded microchips along with payment processing devices that have chip-enabled readers for processing the cards.
The definition of EMV and its intended use is not very exciting and does not seem to offer any great benefits for the consumer or payment provider industry. However, when we start to look at the benefits that will occur after the implementation of EMV for its intended purpose that is when it starts to get exciting. There are five primary future benefits to the program:
- POS systems reliability
- Ease of use and convenience for the consumer
- Potential wallet functionality
- Future value-add applications
The first three items are advantages and individual will benefit from the payment processing system. It is when we look at the last two benefits, wallet functionality and value-add applications that it starts to get interesting for the channel. A chip was developed and embedded into a card. These chips have the benefit of being updated and changed to meet expanded needs and desires. Best of all, these same chips can be added into a smartphone and this will dramatically expand the use of mobile payments. Everyone benefits from mobile payments, including resellers, financial institutions, merchants and consumers.
When we start to speak about “wallet” functions, we are talking about the need to no longer use or carry the cards that the EMV program was to help keep secure. Not having to use the card is going to make it much safer and easier for the payment users and processing community as a whole. Smartphones using smartcards hold the promise of new revenue sources as they provide the opportunity to launch additional services enabling marketing offers, loyalty programs, identity verification, and more. Once the mobile wallet has become a full reality the value-add applications will start to pour in and we will finally see the reality of a checkless, cardless — and almost a cashless society.
We live in a quickly evolving payments environment, one in which every digital device can become a powerful tool for commerce. Leveraging the EMV platform will deliver a range of consumer driven innovations giving individuals the freedom to pay in a ways that best fit their needs and desires, all with a simple tap, click or touch whether they are shopping online, at a brick and mortar location or with a mobile smartphone.
While consumers will benefit from leveraging the EMV platform, so will merchants. They will have greatly enhanced security in knowing they are accepting legitimate cards, they will be able to provide better point-of-sale services and opportunities that all their customers will benefit from and they will be able to add additional functionality, conveniences, and better personalization.
However, the best part is, from a usage standpoint, U.S. consumers will experience only minor differences when making EMV transactions compared to the way they currently pay. Instead of swiping the card at the terminal, the consumer inserts his or her card into the terminal or ATM, or taps their phone or clicks and pays online. That is it, safer, simpler, and smarter.
When the founders of EMV started this process many years ago, we have to assume that they did not anticipate the potential benefits it would offer today’s users nor do we think that many folks who have heard about the growth of EMV realized its beneficial side effects. Finally, we have to assume that even today, with the knowledge we have regarding EMV, will we not fully understand what the future will offer and we will still have the need for “What Everybody Has To Know About EMV?” a few years from now.