Visa said Tuesday that it is making an aggressive effort to push U.S. consumers onto credit cards with embedded security chips, a technology that has become prevalent overseas.
Visa also said that it sees an end to the common "mag-stripe" credit card, which the United States has used for decades. In its place, Visa said it will move to both so-called EMV or "Chip and PIN" technology. Visa also again endorsed near-field-communication (NFC) technology, which embeds payment information inside phones.
Visa also set a deadline: April 2013, the date by which its U.S. acquirer processors and sub-processor service providers must support merchant transactions using chip-based cards.
"Many reading the news may be wondering 'why now?'," Ellen Richey, Visa's chief enterprise risk officer, wrote in a blog post. "For several years, Visa has been talking with clients and merchants on this subject – and now more than ever before, we're hearing confirmation that chip is the right direction for the U.S. Over the last year, for example, we've seen financial institutions issuing chip cards to international travelers. And some large merchants have already begun installing chip terminals.
"We believe our program offers the right level of direction and encouragement for merchant and issuer adoption of chip — at the right time," Richey added. "With a commercial framework in place, our goal is to enhance security and support the next generation of payments."
Visa said it still sees a limited role for signature- and PIN-based cards, especially in low-value transactions. Over time, though, both will be phased out.
In the future, the new chip technology could be itself supplanted or supplemented with so-called dynamic authentication, which tries to create a unique card that can't be duplicated. An example of dymnamic authentication might be a time-sensitive token that could be transmitted via a phone, and matched up against the credit-card number. Another might be the so-called Magneprint technology, which attaches a unique identity to a magnetic-striped card based on the layout of its atoms.
Visa's push is to speed up mobile payments, and to improve international interoperability and security, Jim McCarthy, global head of product, said in a statement.
"As NFC mobile payments and other chip-based emerging technologies are poised to take off in the coming years, we are taking steps today to create a commercial framework that will support growth opportunities and create value for all participants in the payment chain," McCarthy said.
What does this mean? As any recent traveler to Europe knows, the continent is increasingly moving to the so-called "Chip and PIN" technology, where consumers slide in a credit card with an embedded security chip inside, then enter a 4-digit PIN. "EMV" technology refers to Europay, MasterCard and VISA, the three payment infrastructure providers who developed an interoperable standard for the chip readers.
Now, the contact-based payment technologies are moving to wireless, contactless alternatives. Examples include the Mastercard PayPass, the technology that Google partnered with to create Google Wallet, which is due in the fall. PayPass is also EMV compliant, meaning that U.S. customers should theoretically be able to use the cards overseas, as well. Other U.S. retailers to support the technology include McDonalds. Kevin Knight, an executive vice president from Nordstrom, also called the Visa initiative a "positive development".
In February, Visa announced what it called the Technology Innovation Program for international merchants, with incentives for them to move to terminals that support EMV cards. Now, Visa said it had extended the program to U.S. retailers, with one exception: the terminals must support contact as well as contactless cards.
Visa employed both a carrot and a stick to incent merchants to move to the new EMV technology. First, Visa said that it would extend its technology innovation program to U.S. merchants by Oct. 2012, including terminals that support both contact and NFC contactless technology. If they do, Visa will validate their compliance.
Visa also said it would require its acquirer processors and sub-processors to support merchant acceptance of chip transactions by April 2013, including the cryptographic message that makes each transaction unique. Finally, by Oct. 2015 (or Oct. 2017 for those merchants that sell fuel) Visa will push liability for fraudulent transactions onto the acquirer, rather than the card issuer, for those merchants who have not adopted contactless chip terminals. (The acquirer is often the bank that facilitates payments for the business, or a third party it signs up.)
"The way we buy things and pay for things is about to go through a fundamental transformation," said Jeff Kagan, a technology analyst. "First it was cash to credit cards. Now it's credit cards to the mobile wallet on your cell phone."
- mobile payments
- credit cards