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Focus

US EMV Business Case

The hard costs from data breaches, shared
among issuers as well as merchants &
processors, are changing the balance.

Certainly EMV cards cost issuers more than magnetic stripe, and eventually the acceptance infrastructure has to evolve into chip acceptance to derive the benefits of increased payment security. These costs have long been the primary barriers to EMV migration in the U.S.

The situation has changed, and the business case for EMV needs to be reassessed. The hard costs from data breaches, shared among issuers as well as merchants and processors, are changing the balance. Issuers are increasingly being forced to re-issue magnetic stripe cards, both as a result of risk from data breaches and higher online fraud. The cost of reissuing payment cards goes beyond the personalized plastic. Customer service may become involved to deal with cardholders. The bank’s brand is tarnished. And the consumer is inconvenienced, even if not directly impacted financially. Online merchants and other accounts need to be updated with the new number, further aggravating bank customers.

Further, reissuing does not really solve the problem of fraud. It corrects it after the fact, and postpones the problem until the next incident.

If you happen to be one of the unfortunate companies that is victimized by cybercriminals, you incur extraordinary expenses in legal fees, penalties, public relations, brand image and share value.

Migrating the U.S. to EMV is made more complex by the competitive, multi-tiered structure of the payments and acceptance industry. But today all the stakeholders are sharing higher costs driven by the growth of data breaches, online fraud and financial crime malware. For those reasons, the economics of EMV migration need a fresh look in the U.S. by all of the stakeholders.

In addition to a more serious look at EMV migration, however, there are opportunities that first-movers can take now on their own without waiting for an industry-wide consensus.