New EMV Methods: Confusion To Reign Supreme

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Visa introduced Quick Chip for EMV on April 19th and MasterCard quickly followed with the announcement of M/Chip Fast on April 21st. By speeding up how quickly the consumer can remove the card from the POS, these two networks have also increased complexity for the already complicated payment process as implemented by consumers, merchants, and issuers. Where once it was possible to have some confidence a card would work as long as the brand was displayed, life is now more complicated.

Besides Swipe, Dip, and Tap, we now have Swipe, Hover (MST), Show (Chase Pay), Dip, Quick Dip, and Tap – to name a few. Then there are is the question of compatibility. NFC won’t work at non-NFC terminals while a Samsung device with MST will. Swiping an EMV card forces a dip, but only at terminals that support EMV. I’m in payments and I have no idea what happens if I present an EMV enabled card within my Samsung Pay device and use MST to communicate it to a POS that only supports swipe and EMV – does it ask me to dip my phone?

Merchants of course are already hip deep in payment options. So now they need to decide if the best way forward is to improve the brand awareness and education at the POS to support the networks EMV and NFC initiatives or if a proprietary approach might prove more effective. As merchants develop omni-channel strategies that center on mobile interaction they are in a position to drive card on file transactions. Mercator has already written two reports on this topic, one that looks at the overall trend “From Card-on-File to On-Demand Payments: New Payment Model and Strategies For Payment Providers”) and one that looks at it from the merchants perspective “Merchant Mobile Wallets: Mobile Payments in Action.” These reports identify the opportunity for merchants to deploy mobile applications that utilize a card on file and encourage the customer to move into an ACH relationship which lowers the cost of acceptance. Not only does this course of action better engage the consumer regardless of location, at home or in-store, it also lowers the merchants cost of acceptance.

Issuers of Prepaid and debit cards will also find that this new Quick Dip option a challenge to existing card issuance practices. Consider a prepaid card issuer that has decided to go along with President Obama’s new Executive Order to deploy Chip & PIN enabled EMV cards. Cardholders are typically asked to call customer service to change their PIN to a number they can easily remember. That new PIN must be communicated to the chip the next time the card is used at the POS. Given the approach that Visa announced to achieve its Quick Dip implementation, it is unlikely the chip will be capable of receiving the update if the PIN is offline and hence compatible with international usage and so the transaction will almost certainly be declined. The chip will not be re-programmed with the new PIN until it is presented at a POS where the card remains in the terminal until the authorization message is received back from the issuer (for the technical explanation of why EMV must remain in the POS see the public blog “Why EMV Cards Are Stuck in the POS, Which Makes NFC Look Great!”.

All of this confusion is of course the result of intense competition, which in theory is a good thing. It would appear that we now have such a large number of payment methods that the ultimate winners will be those that know how to guide and educate the consumer and any new technology introduced at the POS is likely to just create more confusion.–Tim Sloane is a senior analyst with Mercator Advisory Group.

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