Point of View
Navigating the EMV Evolution:
Financial Institutions Seek Expertise
and Guidance
The migration to chip-based cards using the EMV™ specifications has captured the attention of the U.S.
card market, due in large part to recent high-profile breaches and card compromises and a looming
liability shift from Visa® and MasterCard® for certain types of card fraud. Although there is a growing
urgency among financial institutions, much work remains to navigate the complex transition to EMV
technology. Financial institutions, most of which plan to migrate their entire debit card portfolio, will rely
heavily on expert guidance and information to facilitate EMV implementation.
Although Europay-MasterCard-Visa (EMV) technology
is widely used in most of the world, the U.S. is one of
the last countries to migrate to cards using EMV, which
utilizes an embedded computer chip to store and secure
data. Compared with cards that only use a magnetic
stripe, chip-enabled cards provide improved security,
enable a better experience for cardholders who travel
internationally, and pave the way for mobile payments
and other applications.
Whereas a magnetic strip delivers static data to
the terminal, an EMV chip and an EMV-capable
terminal interact dynamically in real time using more
sophisticated cryptographic authentication technology.
As a result, chip cards provide better protection against
card skimming, which illegally captures data stored
on the magnetic strip to produce counterfeit card(s) or
utilize the card data skimmed for fraud.
Despite its advantages, currently only 1.5 percent of all
credit, debit and prepaid cards use EMV, according to
Javelin Strategy & Research, which expects 53 percent
of point-of-sale (POS) terminals to be able to accept
EMV cards by the end of the year. By the end of 2015,
Javelin predicts that 29 percent of all U.S. credit cards –
and 17 percent of debit and prepaid cards – will include
chip-based EMV technology. Penetration is expected to
reach 96 percent of credit cards and 98 percent of debit
and prepaid cards by 2018.
All four major card associations have announced
timelines for shifting liability for specific forms of card
fraud to parties that are not EMV compliant. By October
2015, Visa and MasterCard will shift the POS transaction
liability for certain types of card fraud, including fraud
resulting from counterfeit, and lost or stolen cards,
to parties that are not EMV-compliant. These fraud
liability shifts, as well as market pressures for EMV
implementation driven in part by highly publicized card
compromises, have created a growing sense of urgency
among financial institutions.
Due to the complex nature of successfully implementing
an EMV program, financial institutions must adequately
plan – and plan now – for all components of their
migration to chip-based cards, from plastic procurement
and personalization of the card, to transaction
processing, risk management, and even consumer and
staff education. To gain an understanding of financial
institutions’ plans for migration, Fiserv surveyed banks
and credit union clients in October 2014. The survey was
completed by 430 financial institutions.
Figure 1: Majority of Financial Institutions Plan to Migrate Entire
Figure 1: Majority of Financial Institutions Plan to Migrate Entire Portfolio ofComprehensive Implementation
Portfolio Debit
of Magnetic-Stripe
Debit Cards to EMV
Magnetic-Stripe
Cards to EMV
As financial institutions work to deliver EMV technology
What are your Financial Institution’s plans to migrate your debit card portfolio to EMV
What are your Financial Institution’s plans to migrate your debit card
to their cardholders, many decisions must be made,
chip cards?
portfolio to EMV chip cards?
including how and when magnetic stripe cards will be
replaced with chip-enabled cards. Fiserv found that 63
percent of financial institutions plan to migrate their
Issue
EMV Cards To
entire debit card portfolio to EMV chip-based cards,
Select Segments
while just 3 percent plan to reissue EMV debit cards for
3%
select segments, such as international travelers. Twentyeight percent are undecided about the comprehensive
Will Migrate
nature of their migration, which points to the need for
Entire Portfolio
guidance and direction from processors (see Figure 1).
63%
Undecided
28%
Other
5%
No Plans
To Migrate
1%
Source: Fiserv Survey, 2014
Source: Fiserv Survey, 2014
Figure 2: Financial Institutions Plan to Reissue EMV Cards as They
Many financial institutions referenced cost
considerations as part of their hesitation. The cost
of terminal and card migration in the U.S. may be as
high as $12 billion for the industry overall, according to
Javelin Strategy & Research Group. These expenses
include card production, required upgrades to POS
and ATM hardware and software, changes in card
processing software, EMV-capable instant card
issuance equipment, and consumer marketing and
education efforts. Migration costs will inevitably vary
by financial institution, depending on various aspects of
individual card programs.
Figure 2: Financial Institutions Plan to Reissue EMV Cards as They Expire or
Expire or Require Replacement
Require Replacement
What are your Financial Institution’s plans to migrate your debit card portfolio to EMVPrioritizing Reissuance of EMV-Enabled Cards
How will you migrate your portfolio to EMV chip cards?
chip cards?
Defining a process for prioritization, whether by card
type, customer segment or some other factor, is
Do a
another important step in the EMV implementation
Mass Reissue
process. Financial institutions may replace magnetic
10%
stripe cards as they expire, or instead may conduct a
mass reissue before the liability shift deadline.
Undecided
36%
As Magnetic
Stripe Cards
Expire, Reissue
With EMV
52%
Fiserv found that half of the financial institutions
surveyed plan to reissue EMV-enabled cards as
magnetic strip cards expire or need to be replaced
for another reason, while 10 percent plan a mass or
accelerated reissuance of chip-based cards. Thirtysix percent of financial institutions report they are
undecided about their plans for replacement of
magnetic stripe cards (see Figure 2).
Other
3%
Source: Fiserv Survey, 2014
Source: Fiserv Survey, 2014
2
Fiserv
Figure 3: Processors’ Recommendations Will Influence Decisions
Complicating this issue are recent card compromises,
about EMV Implementation
which have prompted reissuance of a great number Figure 3: Processors’
Recommendations Will Influence Decisions about
EMV
Implementation
of cards and made expiration dates a moving target.
When
making
your decisions
aboutdebit
EMV chip
debitcards,
chip cards,
much
weight
When making
your
decisions
about EMV
howhow
much
weight
will you
While the number of reissues in the coming year will
you give to the recommendations
of your EFT processor?
give to thewill
recommendations
of your EFT processor?
depend on cards reissued due to compromise, financial
institutions are advised to begin replacing magnetic
Other
Undecided
1%
stripe cards sooner rather than later.
Decisions Will Not
5%
Be Based On
Many financial institutions are evaluating the option of
Recommendations
of Our EFT Processor
instant card issuance so that customers and members can
Follow
1%
be issued an EMV-enabled card immediately. Determining
Recommendations
whether to offer chip-enabled cards in the branch – and
of Our
EFT Processor
how – involves a careful analysis of related costs and
26%
benefits by financial institutions and their processor.
Processor Recommendations Key for
Financial Institutions
Make Decisions With
Some Guidance From
Our EFT Processor
68%
With so many key considerations, the migration to EMV
technology is a daunting prospect for many financial
institutions. Fiserv found that financial institutions are
looking for information and guidance regarding costs,
timing and program components. When asked how much
Source: Fiserv Survey, 2014
weight they would give to the recommendations of their
Source: Fiserv Survey, 2014
EFT processor when making decisions about EMV-enabled
debit cards, 68 percent said they would make decisions
Financial institutions must also answer several key
with some guidance from their processor and 26 percent
questions regarding how EMV-enabled cards will be
said they would follow their processor’s recommendations.
configured. What operating system should be on the
That means that nearly all respondents – 94 percent – plan
card? Will the card work online and offline? Should
to make decisions with at least some guidance from their
contact or dual-interface chips be used? To best manage
processor (see Figure 3).
this complex migration process, financial institutions
should work with a partner that understands transaction
Facilitating the Implementation of EMV
processing, card manufacturing and personalization, and
Many financial institutions are overwhelmed by the
risk management.
number of decisions that must be made – and made
quickly – regarding EMV technology, as well as the
Utilizing a single technology source, including EMV card
number of card options. Fiserv is able to guide clients
packages provided by Fiserv, simplifies implementation,
through every step of the migration process, from
ensures consistency, and enables a cost-effective,
reissue strategies to plastic options, implementation
timely and efficient roll out of EMV-enabled cards. As
pricing, and cardholder and staff education. A processor
the pace of EMV implementation quickens, now is the
that understands the complexities of the payments
time for education, awareness and action.
landscape and the implications of EMV can help
financial institutions determine the best path forward,
including appropriate timelines.
Point of View
3
About the Author
Jamie Topolski is the director of alternative payment
strategies for the Output Solutions group, Fiserv. His
focus is delivery of a cost-effective, comprehensive and
integrated EMV solutions and support of Fiserv clients
as they prepare for and implement the migration to
EMV chip cards. Topolski serves on steering committees
for the Smart Card Alliance Payments Council and the
EMV Migration Forum.
Connect With Us
For more information about EMV, call 800-872-7882, email
[email protected] or visit www.fiserv.com/emv.
Fiserv is driving innovation in Payments, Processing Services, Risk & Compliance,
Customer & Channel Management and Insights & Optimization, and leading
the transformation of financial services technology to help our clients change
the way financial services are delivered. Visit www.fiserv.com for a look at
what’s next now.
Fiserv, Inc.
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Brookfield, WI 53045
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[email protected]
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