Visa and MasterCard continue their push to get merchants in the United States to install Europay, MasterCard and Visa (EMV) capable terminals so that they can push issuers to transition to what most of the world refers to as “Chip and PIN”. Because Visa and MasterCard have a vested interest in EMV technology, they feel obligated to push this “dead horse” onto the rest of us. The problem is that merchants and everyone else outside of Visa and MasterCard have with EMV is that there is not a business driver to convert as EMV does little or nothing to address today’s card fraud issues.
As background, EMV was developed to address the rampant card present transaction fraud that occurred with the fall of the Iron Curtain back in the late 1980s. Overnight, credit/debit card cloning of the magnetic stripe on the cards became big business in Eastern Europe. With the rollout of EMV in Europe in the mid-1990s, card present transaction fraud plummeted to at or below the levels in the United States because the chip in the EMV card was impossible to clone (although to be compatible, EMV cards have a magnetic stripe which still can be cloned). Spin ahead a decade to the mid-2000s to today. Card present transaction fraud continues to be at about the levels in the United States and Europe.
Times change and so does fraud. With the advent of eCommerce over the Internet starting at the turn of the century, fraud has moved to card not present transactions. As long as someone has the PAN, expiration date and cardholder name, you can shop almost anywhere. And if you are someone who is committing fraud, you can buy that information via the Internet for around $2 to $10 an account. Pay more and you can get the three to four digit code (CVV2, CVC2, CID, etc.) that confirms you have the card in your possession. Card not present frauds run around 10 times or higher than card present fraud and is costing merchants and some consumers billions every year.
So what does EMV do to minimize card not present fraud? Absolutely nothing. Not that there have not been attempts to introduce EMV-based solutions for eCommerce. A number of European banks and American Express in the early to mid-2000s tried to introduce standards that used inexpensive serial and USB EMV card readers connected to a shopper’s PC. But none of these solutions could gain traction with eCommerce application developers and merchants, so eventually they dropped their efforts. Had Visa and MasterCard had some foresight, they would have partnered with a few of the influential eCommerce merchants and eCommerce application developers and created an eCommerce EMV standard and related APIs, but that did not happen.
To add insult to injury, EMV probably only minimally improves the risk of data breaches. The reason is that EMV moves attacks to compromising terminals and POS systems at the merchant and gaining access to systems and information at the transaction processors and financial institutions. That is because once the information in the chip is being processed, it is handled the same way as information off of a magnetic stripe. If it is not processed, stored or transmitted securely, an EMV card is just as susceptible to being breached as its older, less secure magnetic stripe counterpart. And given the current state of affairs with BlackPOS, POS botnets, vSkimmer and the like, the risk with EMV is probably only slightly better than magnetic cards.
Unfortunately for Visa and MasterCard, technology has moved on. With the advent of smartphones and tablets, application developers created eWallet applications. eWallet applications store a cardholder’s credit/debit card information in a secure file or database. Some eWallet applications use these devices’ near field communication (NFC), Bluetooth or Wi-Fi capabilities to securely transmit the card information to a merchant’s POS solution. There are also eWallet applications that display the PAN as a bar code so that merchants can use their existing POS technologies to scan it from the screen. Coming in the near future are eWallet applications that will generate a single use 16 digit number with bar code, NFC, Bluetooth and Wi-Fi capabilities. All of these solutions offer as much, if not more, security than EMV.
The times have changed and so has card fraud. Yet here we are with Visa and MasterCard continuing to push EMV technology. EMV does little to nothing to address today’s issues or issues that are down the road. It is time for Visa and MasterCard to move on from EMV and look for the next new solution and stop pushing a dead end technology on merchants that have no good business reason to adopt it.