EMV in the USA: Waiting on Debit, a Mandate, or Just the Opportune Moment

EMV in the USA: Waiting on Debit, a Mandate,
or Just the Opportune Moment

Boston, MA - Payment card security shortcomings still make headlines because card data breaches continue to plague the industry. EMV (a.k.a. Europay, MasterCard and VISA) is the smartcard-based technology the payment card networks have chosen as the best defense at the payment perimeter, the POS terminal. EMV has been deployed in most markets except the world's largest card market: the USA. This new report from Mercator examines the questions "why not" and "when" for EMV.

Revealed in Mercator Advisory Group's EMV in the USA: Waiting on Debit, a Mandate, or Just the Opportune Moment report is the relatively modest cost of EMV issuance to US passport holders. While the UN Federal Credit Union is the first financial institution to issue EMV cards, Mercator forecasts at least one major US card issuer to provide a fee-based EMV card to its high net worth, traveling clients.

"EMV technology has the lead position in securing the payments perimeter today. It's a standard that can be deployed in contact, contactless and mobile form factors. But the constraints of cost, uncertainty over ongoing debit regulation and the impact of evolving NFC mobile payments, as well as historical card network reticence means any EMV announcement will be delayed and muted when it arrives," George Peabody, director of Mercator's Emerging Technologies Advisory Service comments. "We forecast another quarter or two before the starting gun fires. And even then, it will be incentives based rather than an immediate mandate."

The report focuses on the costs, constraints, and opportunities for card issuers, merchants and the card networks themselves as they all face the EMV question. It discusses the potential role of federal regulation on the timing of a US EMV rollout. The report includes recommendations for card networks, issuers and merchants planning their POS replacement strategies.

Highlights of the report include:

The Federal Reserve's debit rule making injects significant uncertainty into the timing of an EMV roll-out by the card networks.Mercator forecasts an EMV "go ahead" in the first half of 2011 with merchant incentives to accelerate EMV-capable terminal deployment.

The EMV business case for individual issuers cannot overcome competing priorities and current practices around fraud losses.

In Canada, EMV terminalization has been a breakout strategy for contactless. Given mobile NFC's rise in the US, a similar effect could be anticipated in the US market.

EMV payment card issuing costs in the USA run between $2.4B and $2.8B depending upon smartcard interface configuration, contact only or contact + contactless.

Merchants are advised to "spend the $10" for EMV capable terminals now in anticipation of an eventual EMV roll-out.

One of the 5 exhibits from the report:

This report contains 24 pages and 6 tables, and 5 exhibits.

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About Mercator Advisory Group
Mercator Advisory Group is the leading, independent research and advisory services firm exclusively focused on the payments and banking industries. We deliver pragmatic and timely research and advice designed to help our clients uncover the most lucrative opportunities to maximize revenue growth and contain costs. Our clients range from the world's largest payment issuers, acquirers, processors, merchants and associations to leading technology providers and investors.