It's Time to Move Forward with an EMV Debit Solution

It’s becoming clearer that the EMV Forum’s Debit Working Committee is struggling to maintain the momentum it built on the back of the double debit debacle caused by, first, Senator Durbin’s eponymous Amendment, and now, Judge Richard Leon’s Federal Reserve Board interchange interdiction.

  The Big Brands, Visa and MasterCard, continue to give the industry the silent treatment when it comes to questions about their proposed EMV debit application solutions and which might be issuer-worthy.  Their cover for going dark is the uncertainty caused by Judge Leon’s ruling and the FRB’s appeal.  This could go on for a year, maybe more. If it does, what do the PIN debit issuers do for EMV while they wait out the appeal process?

The payments industry has always functioned with a degree of uncertainty.  That uncertainty is managed by risk controls that consider the alternatives and then build solutions accordingly.  But in the case of EMV, that uncertainty is providing the Brands with deep cover against any unwanted scrutiny by the people outside of the Brands’ inner circles.  So we wait.  Until when?  Note that EMF Debit Working Committee meeting normally scheduled for Tuesdays was repeatedly canceled during July and August. Tough to have a conversation when one side won’t talk.

The waiting game is good for relationships, maybe.  It’s like surprises, which are good for our kids, our mates and our courtships.  But it has no place in business. 

 

Business abhors inertia. And surprises. We plan. 

We consider the possible alternative outcomes, assign probabilities to those outcomes and calculate the ‘expected value’ for any given outcome or situation.  So why is that not happening now?  Indeed, is this a case of ‘any port in the storm?’  Are the Brands rethinking their involvement in EMF?  What did they think they had to gain by joining an industry working group in the first place?

The Debit Working Committee of the EMF is soliciting agenda items for the September 17 and 18 EMF meetings in Dallas.  The Tag Group will present their proposed solution but is refusing to put that solution in writing until the Leon dust settles.  At least we’ll know what their proposal is and hopefully, be given the tools to know whether it’s something issuers can live. 

And the AID issue?  It will remain unknown at least until mid-September.  Of course, at that point in time, we’ll be two weeks away from the formation of CommonCo.  And launch of that entity should lead to a comparison of the AID solutions being proposed by SRPc, Visa and MasterCard. 

We’ve submitted an agenda item for the September meetings – to allocate time for the technology providers to show everyone the value their solutions bring to the industry.  We hope Debit Working Committee accepts this agenda item for the Texas meeting.

Time’s running out. As they say down in Texas, time to git all the liars ‘round one table…

The Price of Silence and What About that Business Case?

As you may recall from the previous post, Visa and MasterCard on July 30 made a joint announcement of their intention to co-license their PIN debit routing application technology.

 So what’s happened since then? The answer is more like what hasn’t happened. Two weeks of meetings of the Debit Working Group of the EMVMigration Forum were canceled since the Brands made their big announcement.  Coincidence?  Something more nefarious?  Something in between? 

The next working group meeting is scheduled for Tuesday, August 20. So far this meeting is still on track.

Part of the industry silence that has greeted the Brands’ co-licensing announcement may be technical. The entity proposed to manage a common application ID among the Pin Debit Networks, dubbed CommonCo, is not yet up and running. The timetable for that is late September.  That has left a void with no one to speak to the Brands’ joint release on behalf of the PIN debit networks.

The issuers have to be thinking about this.

In the meantime, while the reaction to the Brands’ co-licensing agreement has been muted, there has been plenty of talk about the business case for EMV.  We posted about this several weeks ago.

American Airlines went on the record at a recent EMV Migration Forum meeting to explain why it doesn’t see a need to move to EMV.  According to American, most of its sales are online in an e-commerce setting.  This means they could potentially be exposed to card-not-present (CNP) fraud.  But they’re not even worried about that.

 Indeed, at the CNP Working Committee meeting held earlier this month there was a good deal of talk about how to prevent CNP fraud from escalating once we move the physical POS to EMV. But American expressed some doubt whether they’d have any increase in CNP fraud.

Why?  Because someone buying an airline ticket can’t even get past security to board a flight unless the TSA knows who they are.  And the TSA has nothing to do with EMV.  Indeed, why do any of the airlines need to worry about the liability-shift dates when their customers are forced by the federal government to disclose who they are before they can buy anything or get past security to board a flight?  Answer: They don’t.

Nevertheless, airlines serve people from all over the world and currently the airline countertop infrastructure can only handle mag-stripe transactions. So the airlines will likely make this shift just to ensure worldwide interoperability for payment technology.  (In point of fact, Citibank offers an American Advantage EMV-compliant card for its global travelers.)

Passenger air travel is a high volume, low margin business. It's easy to see EMV as a non-essential expense the airlines will take on reluctantly. We have to wonder how many companies in other merchant categories think the same way.

And whither the Debit Working Committee? We’ll update you next post. 

4 Significant Factors That Will Determine the Course of EMV Migration

There are many issues regarding the onset of EMV into the US payments infrastructure that have yet to be ironed out and/or fully understood. But there are four right now that stand out, and on which the shape of the U.S. EMV implementation rests.  Discussions over the last year have turned up a raft of issues that have to be resolved.  But these four stand out because how they are decided will ultimately help determine what EMV will look like here.

Over the coming weeks, EMV Update will explore these four factors along with others that emerge as the U.S. payments industry continues its evolution into the realm of smart card technology. 

Here are the four issues EMV Update sees as most significant in determining how EMV will roll out in the U.S.:

1.       U.S. Common Debit AID –This is the chip’s payment application that identifies the available networks to which an authorization request can be routed.  It’s up to the merchant to actually put the transaction into the routing infrastructure.  Four viable applications are available for use under different licensing agreements from either the major card brands like Visa or MasterCard or a consortium called CommonCo.  CommonCo. was formed by 10 ten of the 18 PIN-debit networks (PDNs) in the U.S. under their affiliation with the Secure Remote Payment Council or SRPc.  Issuers have been waiting for one of these applications providers to produce a set of specifications.  To date, a spec is missing and, with it, the pathway for implementing PIN debit in the U.S. under EMV.

2.       The EMV Business Case – Many of the merchants who must bear the brunt of EMV’s implementation costs, are saying they don’t have the kind of fraud that justifies EMV’s costs.  They’re essentially saying they’re indifferent regarding the liability shift.  This issue will be explored further in coming weeks.

3.       Card Not Present Fraud – Every country that has implemented EMV has watched their CNP fraud grow exponentially.  To date, there doesn’t seem to be a solution.  But is there?  Can we develop one?  With whose help?  Another hot topic.

4.       Contactless – Is there a role in EMV for contactless technology?  Can we find ATMs in the world that can be activated with a contactless EMV card?  And if the answer is ‘no,’ what does that mean for Near Field Communications technology?  For a future blog post.

EMV implementation in the U.S. leaves much to be discussed in future posts.  C’mon back. We’ll give you an honest analysis of what’s happening with these four issues and how they’ll impact what may or may not be in your wallet in the coming years.http://www.cvent.com/events/emv-migration-forum-meeting-june-13/custom-19-403fa5c3460d4d8e81eb221ee1b2a08f.aspx