Since the Target Senate hearing earlier this year and their very public endorsement of EMV (with PIN!) there’s also been considerable kickback against the standard and its implementation in the US (articles such as this).
However, the truth is that the US needs to accept a position of forced altruism. It needs stick to its EMV migration path and the current timetable of liability shifts for the good of the rest of the world – or potentially risk loss of business as more international issuers exercise their rights to decline all transactions based on geographical location. Payment card fraud losses totaled $3.56 billion in 2011 in the U.S. according to CAP Gemini (here), at a cost of around $8.6 billion (here) – most of which was passed to the Issuer and the Merchant (as the point of acceptance). This rose considerably in 2012 and indications are that there was another significant rise in 2013 – CAP Gemini’s prediction of $10bn losses by 2015 may happen a year earlier. Essentially the cost of fraud is now rapidly outstripping the cost of EMV migration, which was initially estimated at around $8.6bn (here).
The stark statistics show us that although only 27% of global card transactions are in the US, 47% of fraud is now committed there (here) but this is not part of the ‘7 basis points’ fraud figures that the US has proudly boasted that its online/magstripe combination brings, as most of this fraud isn’t eaten by US-based banks. Basically the Global card payments bucket, a $30 trillion business, has a hole and the value contained within is leaking. When the liability shift comes in October 2015, there will be a deluge of international fraud pushed back to the non-compliant Acquirers and Merchants in the US, which is why the naysayers are desperately battling to stop the shift.
The US isn’t the only place still to migrate to EMV – countries such as the Democratic Republic of Congo and Somalia are still to finalise their migration strategies – but with the US liability shift, there will be a significant change in global card payments dynamics. And of course, change is hard, but sometimes pain is necessary to reach the best end result.
If you are a US-based card Issuer, your best course of action is to begin your project today if you haven’t already. Likewise if you are a Merchant, the cards are coming and you’d better be ready as the oft paraphrased quote from former Deputy US Attorney General Paul McNulty suggests, “If you think that compliance is expensive, try non-compliance.” Personally I believe another quote of his applies better here, “
They think if they say ‘unfair’ five thousand times, eventually you just believe them, … The strategy is clear: attack the process, attack the process and that way you never get to the facts.”