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Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

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October 17, 2016

EMV Comments That Make Me Cringe

Some aspects of the chip card implementation in the United States certainly make us frustrated. For one, the customer experience could be seen as slightly more negative because of the longer transaction time and confusion about the debit card selection menu. However, at several payments conferences I have attended recently, I have heard comments made by speakers and panelists about EMV chip cards and their technology that caused me to cringe a bit. I understand that a number of stakeholders are not proponents of EMV technology for a variety of reasons and, while some parts of their comments are factually accurate, they certainly are not "the truth, the whole truth and nothing but the truth."

Cringe #1: The United States is implementing 20-year-old-technology with EMV chip cards. Yes, the first EMV specifications were publicly released in 1995. But isn't that like saying that the gasoline-powered automobile is technology that is 130 years old? Microsoft's first release of Windows was in 1985. Do we hear complaints about it being 30-plus years old? The reality is that the EMV specifications, like practically all software development, are continually updated over the years with enhancements continuing as long as the software is still being supported. The EMV specifications are now at version 4.3, released in November 2011, with 20 supplemental bulletins issued since then and more on the way.

Cringe #2: EMV (chip) cards haven't solved the card-not-present (CNP) fraud problem. Again, this is an accurate statement. CNP card fraud is the second largest category of fraud losses in the U.S. (see the chart). But, the statement is misleading inasmuch as the EMV specifications and chip cards were never intended to address the CNP ecommerce environment. Counterfeit card fraud, whereby the criminal produces a card using data obtained from a skimmer or data breach, has been the number-one source of card-present fraud in the United States. It was this type of card fraud that the chip card was designed to target, and, from all accounts to date, it has been highly successful in doing so.

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Source: Chip Cards in the United States: The PIN, PINless, Debit, Credit Conundrum, Aite Group, July 2016

Cringe #3 – Using a PIN improves the security of the chip card. While a cardholder using a PIN in lieu of a signature does clearly result in a lower level of fraud losses, the claim is somewhat of an apples and oranges comparison. The chip on the card authenticates the card itself, while the use of a PIN is intended to authenticate the cardholder performing the transaction. These are two separate types of authentication which, when combined, make the transaction more secure—a good thing. The use of a PIN should result in lower lost/stolen card fraud as it invokes two-factor authentication—something you have (card) and something you know (PIN).

Are the current EMV specifications perfect? Of course not, and that is why there are constant efforts to identify ways to improve them. But one must recall that the EMV specifications provide global interoperability and must be developed keeping that requirement in mind. What are your thoughts on the EMV specifications and how they can be improved?

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

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