Why Hasn’t the U.S. Adopted EMV?

EMV chip technology is not new, but why hasn’t the U.S. gotten on board?

With advanced security, endless technology benefits and success in many other markets, it can be confusing as to why Americans are not already seeing widespread use of EMV technology. After the 2013 breach of Target credit cards during the holiday shopping season, business leaders, including Target’s CFO, are now calling for acceleration adoption of the technology.

So why isn’t this more widespread? This infographic breaks down the benefits of the card and some potential  reasons why the payment technology hasn’t been widely adopted in the US.

What do you think about EMV? Will it still be Europe-only?


Smart Cards
Source: ComputerScienceDegreeHub.com

Security: What It Takes to Lead the Way

You say Target, we say EMV—how’s that for a conversation-starter?

The recent mass hack of retail giant Target—it’s estimated that more than 100 million consumers’ information might have been compromised—has generated considerable attention, as does every data breach that cuts to the bone. Expect to see the usual hand-wringing and calls for newer and more effective procedures, and with good reason. It’s entirely fair to ask why and how a multimillion dollar security network of the kind Target surely has could be brought to its knees—allegedly—by a software tool created by a teenager, written in a common scripting language and widely available on underground sites for barely $2,000.

That’s why we should expect to be hearing a lot more about EMV. For the record, the acronym represents Europay, MasterCard and Visa, and it first saw life as a joint effort between those conglomerates to enable greater security and interoperability in chip-based payment cards. The specification covers everything from POS terminals to ATMs, meaning every store and bank simultaneously. The standard is now defined and managed independently, and Integrated Circuit (IC) or chip cards based on it are being rolled out throughout the world. The chip and related software ensures that each customer’s account number and other details are essentially invisible. The suggestion here, and it would be label the potential benefit any differently, is that it would help contain the damage wrought by the Target hack.

Of course, when something is a global standard, that doesn’t mean it covers every market—there are always exceptions. And in the case of EMV, there’s a big one: The USA. Many regions across the pond have embraced the new technology, but magnetic-stripe cards, which are far more vulnerable to data theft of the kind we saw at Target, remain the norm on these shores. Credit card companies, who are among those hardest hit by data theft at market-facing outlets like banks and stores, have been stepping up pressure on their partners to adopt the EMV specification and introduce IC cards. But it’s probably not going to happen for a while.

There’s a good reason for this, or perhaps 8 billion reasons. That’s the dollar figure attached to the estimated cost of a full-on conversion to EMV technology adoption.

The simple truth is that through sheer size and economic heft, the U.S. is the world’s largest market for just any product it embraces. That gives it enormous standalone power—it’s why, for example, music stars who sell out globally barely make a dent on the charts here, or the World Cup can be the biggest sporting event while remaining a second-tier event for American consumers. The U.S. plays by its own rules, because it can.

It’s also worth noting that while credit card companies are rightly concerned about data fraud and consumers have reason to fear identity theft, the retail industry can make the case that the cost of conversion to the EMV spec, despite the benefits, isn’t justified by the potential prevention of fraud, (losses from this type of attack has been estimated in the $1 billion a year range.) Besides, federal statutes protect consumers from having to pay for purchases made fraudulently with their credit and debit cards.

Most importantly, it’s always premature to see any technology as a panacea. Protecting financial information is an ongoing struggle, a non-stop effort to stay ahead of the bad guys. Whatever measures we put in place, sophisticated cybercriminals will find a way to circumvent. However, the fact that credit card fraud rates in America, previously among the lowest anywhere, have doubled since IC cards began proliferating in Europe is cause for concern.

Whatever the merits of the argument, the current interest in EMV makes for a case study in market leadership. The fact that the U.S. retail and banking economies are so massive and complex should not automatically be a reason for them to be technologically behind the curve. We always need to be doing better. The EMV specification is one option that seems to provide enhanced security, but that’s it—one option. Being the biggest, and arguably the best, means it’s our responsibility to lead the way identifying, developing and implementing many more.

What We’re Reading: Mobile Deposit, Payments and Mobile

Below are interesting stories the Banking.com staff has been reading over the past week. What have you been reading? Let us know in the comments section below or Tweet @bankingdotcom.


  • First Niagara Website Redesign Drives 30% Increase in Traffic

American Banker

Since the First Niagara’s website re-launch, traffic has gone up 30% and the time customers spend on the site has gone from 10-15 seconds to two minutes and thirty seconds. “They’re actively shopping and looking for information on the site,” Thomas Bontempo, senior vice president and digital marketing director says. “We’ve improved online account opening and are now getting 500 funded new accounts online a month. That’s still not where we need to be for a bank our size, but we’ve taken the right steps and it’s the right direction.” Customer satisfaction rose from 64% to 72% after the redesign, according to a survey the bank conducted.

Read more

  • Brand expansion through branchless banking

ATM Marketplace

While transactions at financial institution branches across the U.S. are dropping by approximately 5 percent per year, PC and Internet use are on the rise. The trend toward nationwide and even global connectivity is providing a unique opportunity for FIs to reach new markets and drive services from declining bank branches directly into the homes and hands of customers. Conventional banking channels are reaching inherent limits while increased access to Internet and mobile are making banking from home far more attractive for consumers. A 2010 survey by the American Banking Association found that 36 percent of bank customers preferred to do their banking online.

Read more

  • Best Practices for New Product Roll-Outs


Building out or improving remote delivery channels, such as online banking, mobile banking and electronic bill pay, with new products and systems represents one of the greatest opportunities a bank can face – and one of the greatest challenges, as well. Relying too heavily on vendor expertise has meant a missed opportunity for many institutions. While vendors have a lot of insight into best practices, they typically do not offer or bring that experience to their clients unless specifically asked. Leveraging internal resources and expertise, as opposed to simply implementing new software, will help banks bridge the gaps in a vendor’s statement of work (SOW) and successfully launch these important strategic products.

Read more

  • The New Ecosystem for Mobile: Technology Alliances for M-Payments and M-Banking

Bank Systems & Technology

Banks and financial institutions are most effective when they can utilize technology and outsourcing services to give customers full accessibility to their accounts – but reduce their direct interaction with customers. To this end, we are seeing banking technology vendors continuously generate innovative ideas and solutions. During the past decades, we’ve witnessed the evolution of Checks and their Clearing Systems, Automated Teller Machines (ATM), Point of Sale (POS) devices, Interactive Voice Response (IVR) Systems and the list continues. The evolution of mobile technology has allowed banks to embed mobile in their front-end solutions offering flexibility, ease of use, and accessibility to their banked customers and account holders. Through Mobile Banking (m-Banking) services; users can review their balance, transfer money between accounts, and perform some sort of utility payments along with many other services that enables interaction between the account owner and the bank’s back office systems.

Read more

  • China, South Korea lead world mobile commerce

Inside Retail Asia

Mobile commerce is playing an increasingly significant role across Asia-Pacific according to a new report.  The study found that 55 per cent of internet users in China made a purchase via a mobile phone in the fourth quarter 2012, making China the country with the world’s highest mobile shopping penetration rate. For an idea of just how dominant the mobile purchase channel is in Asia, consider the case of North America. There, just 19 per cent of US internet users and 13 per cent of internet users in Canada made a mobile purchase in the fourth quarter. In other words, China’s mobile purchase penetration rate is nearly triple that of the US. eMarketer estimates that 270.9 million internet users in China will make an online purchase this year – counting purchases made through mobile devices. By 2016, eMarketer projects that number to rise to 423.4 million, and mobile will clearly play a significant role in that transition.

Read more

  • Evolution to Revolution: Real-Time Payments Initiatives Unfold

Javelin Strategy & Research Blog

The Australian Payments Clearing Association (APCA) was the latest multi-stakeholder group to approve a real-time payments initiative in support of evolving consumer and business needs for accelerated transacting. As noted in Javelin’s recently released report, Real-Time Payments 2013: Struggling Toward Revolutionary Change, many of the payments mechanisms in use today — as well as the networks that support them — were developed before the era of “always on” connectivity, before Internet commerce, and prior to the ubiquity of mobile devices. These new market components, however, are driving a global paradigm shift that is beginning to snowball.

Read more

  • Mobile banking will break the 1 billion user mark in 4 years

Mobile Commerce News

By the year 2017, studies are showing that the use of these services will have skyrocketed. The latest mobile banking study data from Juniper Research has indicated that an increasing acceptance of this type of smartphone and tablet based service has caused users to bring the number of users up to nearly 200 million. It is expected that the growing use of tablets will play an important role of the industry’s adoption. In fact, while mobile banking over tablets represents 9 percent of the total number of customers at the moment, it is expected to represent 19 percent by the close of 2017, said the Juniper Research data. Consumers are taking on increasingly mobile lifestyles, which is allowing them to turn to this type of service more and more.

Read more

  • Mitek: 12 Million Americans Have Deposited Checks Via Mobile

Mobile Marketing Watch

The rate of adoption observed in mobile banking is surprising even the most bullish of industry advocates. According to the latest data available, Americans have now deposited more than $40 billion into their accounts by simply snapping a photo of a check. All told, some 12 million mobile users have now made a mobile deposit, a number that is poised to expand further in the wake of new partnerships and opportunities that make mobile banking options more readily accessible. Mobile Commerce Daily reported Tuesday, for example, that 708 banks and credit unions have signed agreements with Mitek – makers of the leading mobile document capture software – to provide mobile deposit options to customers.

Read more

  • The knives come out: Mastercard will charge PayPal and Google for their mobile wallets (updated)

The Verge

Visa’s CEO Charlie Scharf said that “it is totally appropriate” to charge companies like PayPal and Google a fee when their digital wallets get used. Both PayPal and Google offer something called a “staged wallet,” which means that those companies act as a kind of intermediary between you and your credit card. That theoretically helps make your wallet easier to use — since it can contain multiple cards — but Visa and Mastercard really hate this approach because it means they can’t collect as much data about your purchasing habits. Scharf’s statement comes on the heels of an already-announced Mastercard program called the “staged digital wallet operator annual network access fee,” which is a long way of saying that it wil begin charging companies like PayPal when they use a Mastercard plugged into a PayPal digital wallet.

Read more