The announcement of Apple Pay was quite a newsmaker, if for no other reason than the brand giant decided to work with established payment players rather than create everything on its own from the ground up. They embraced the standards and created an unexpected hybrid approach to build an ecosystem that leaves the issuers and schemes to do what they do best. This includes the use of EMV (Europay, MasterCard (News - Alert) and Visa).
After receding into the background upon becoming a standard in the early 2000s, EMV is enjoying a bit of the limelight again. Is Apple (News - Alert) Pay’s use of EMV a major endorsement, snuffing out complaints that it is a “brick-and-mortar” technology anchored in the past and instead cementing its place as the bedrock of future payment infrastructure security? Or, has Apple Pay simply given EMV a short-term “shot in the arm” – nothing more than a pragmatic move from Apple, driven by the need to quickly gain critical mass with U.S. merchants?
Apple’s name and reputation are beyond compare, carrying serious clout worldwide. This time, however, certainly for issuing banks, this move by Apple is bigger. Faced with an uncertain and shifting industry, issuers might need to rethink their strategy around EMV. For some, EMV has already become a mundane aspect of card production, an ideal task to be outsourced, which they have done. Others are seeing EMV as a strategic technology platform and have been looking to bring some of the issuance process back in-house in order to gain greater control. Both groups might now be rethinking their positions.
U.S. merchants and issuers are less than one year away from the card schemes’ first EMV liability shift deadline for the U.S. payments market, and debate about the value of EMV continues. And there have already been numerous mutterings about whether this is a worthwhile transition, given the cost of new cards and the logistics and expense required to update ATMs and POS systems.
To its credit, EMV has arguably brought great flexibility to the payment security ecosystem, underpinning authentication for cards, contactless cards, NFC phones and remote authorization. EMV has also been successful at driving down counterfeit fraud at physical POS in the regions where it has been deployed.
EMV Next Generation and EMV Tokenization specifications are currently in development with worldwide stakeholders, part of EMVCo’s (the governing body for the EMV standard) ongoing enhancements to future-proof the platform. Multiple extensions including enhanced transaction information for acquirers, card networks and issuers, improved transaction flow and user experience at the POS and a significant upgrading of the security architecture including a secure channel between the card and the acceptance device (whatever or wherever it is) are currently being explored.
However, as banks seek to understand how best to evolve their all-important payment strategy and infrastructure, the EMV conundrum will be top of mind for decision makers. Can they afford to wait for the long-term enhancements of EMV to take hold, or do they have to take risks and adopt new technologies at a rate more typical in the mobile ecosystem?
It is clear that EMV is working to create an across-the-board platform that serves contact, contactless and mobile. For some within the industry, though, this effort may be too little, too late to be of long-term future use.
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