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| Subject: In the United Kingdombusiness case to be made for reducing fraud with EMV | |
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Author: walt12 (ID#: 108490) ERG-EMV27/10/02 1:18:23 PM 5653329 |
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Date Posted: 10:14:26 01/14/03 Tue walt12 (ID#: 108490) ERG-EMV -Lifestyle cards.. 27/10/02 1:18:23 PM 5653329 « Prev Msg Thread Next Msg Thread » The movement from magnetic stripe to chip is well underway. Banks globally recognise the massive savings on fraud but also the costs involved to fund the initial rollouts. As with any new system there will be teething problems as sumarised below. ERG offers multiple applications with a steadily growing critical mass that will rise substantially as transit authorities upgrade to chip. Melbourne is a case in point given the problems with AFC's there. At the end of the day card issuers will engage companies such as ERG to design and implement AFC's and reconcile data from the number of software solutions,multiple applications, providing revenues that will grow year after year. EMV appears to be past the post offering a global(debit/credit) standard. The worldwide migration to EMV will do for chip-based credit and debit cards what the magnetic stripe did for the present generation of payment cards, only with more security. But the costs are hard for banks to swallow–hundreds of millions of dollars worth of new cards; even more for bank-owned point-of-sale terminals and automated teller machines; and then there are the incidentals, such as new back-end software to process transactions. For card issuers and acquirers, especially in countries with low fraud rates, the business case for moving to EMV has long been difficult to find. Nonetheless, Visa International’s EU region expects 75% of cards and 90% of terminals to be EMV-ready by January 2005. That’s when Visa, along with MasterCard International, and the latter’s recently acquired Europay subsidiary, will begin the first major shift in liability for card fraud that this year will eat up an estimated $2.5 billion globally. The January 2005 deadline applies to banks in Europe. Those not ready will get stuck with the tab for fraudulent transactions. Banks in Asia-Pacific face a deadline the following year, and other regions, except for North America, face mandates, too. MasterCard has revised its forecast for how big a part of its 300 million cards and of the terminal infrastructure of its shareholders in Europe will be ready by the end of 2004, expecting just “over half” to meet the deadline—down from two-thirds a year earlier. In Asia-Pacific, it won’t be until 2008 before 90% of cards and readers comply, according to Visa, though banks in such countries as South Korea, Japan and Australia seem more ready than their European counterparts to adopt the multiapplication mantra. In the United States, where banks and their card organizations have declined to set any EMV deadline, once-promising prospects for multiapplication banking cards have slumped along with the tech sector and the economy in general. But EMV isn’t being forced down the throats of member banks or shareholders, points out Toni Merschen, head of MasterCard’s recently formed chip and mobile commerce unit in Belgium. Banks, after all, control these organizations. “It’s heavily supported by the member banks,” he says. “We see the members in various regions migrating as we speak.” In the United Kingdom, unlike most other countries, especially in Europe, there is a business case to be made for reducing fraud with EMV. Last year, losses from counterfeit and lost and stolen cards reached 274.3 million pounds (US$426 million), up 31.2% from the year before, according to the Association for Payment and Clearing Services. Total fraud in the United Kingdom made up nearly .2% of sales. In France, which introduced the world’s first national chip-based banking card 10 years ago, fraud plummeted to less than .02% of sales on domestic transactions, according to the latest figures available from banking association Groupement des Cartes Bancaires, which is no longer allowed by the government to release such statistics. The French cards, similar to entry-level EMV cards, when combined with PIN, obliterated losses from counterfeit and lost or stolen magnetic stripe cards. But the chip does not protect the French cards from fraud in other countries, where terminals read the card’s magnetic stripe. Visa International believes the lack of interest in multiapplication cards may stem in part from hassles banks anticipate in storing and managing data from different content providers on cards and terminals. Visa later this year plans to announce an initiative to standardize the way data is loaded and stored on cards and terminals. “Just as a payment system needs EMV, so I believe multiapplication needs the same form of standard,” says Visa EU’s Qureshi. “If you want to have true multiapplication, you need to have multiple issuers and multiple merchants. We feel confident that over the next three to five years, consumers will be the focus of this technology, and you will have lifestyle cards.” Multiapplication may fly first in Asia-Pacific. Issuers in South Korea and Japan are combining EMV payment with contactless transit fare-paying, or plan to do so. In South Korea, banks and credit card companies are issuing cards with dual-interface chips that can run such applications as credit and retail e-purses in contact mode and others, such as transit, with a wave of the card near terminals. Most of these credit applications do not comply with EMV, but that is changing. Moreover, the fierce battle for market share among the country’s mobile operators is spilling into the payment arena. At least two of the country’s three wireless telcos will launch mobile payment services this fall that store an EMV application on a special chip card in the handsets, allowing consumers to beam their payment details to POS terminals. “Fraud losses are extremely low in Korea; the strategy in Korea for our members is to compete using chip technology,” says Visa AP’s Maher, adding: “It’s almost as if they have to issue the (bank) card with a transit application, or they don’t issue a card at all.” Japanese issuers started rolling out EMV cards in early 2001 and will likely have more than 15 million cards in circulation by the end of the year. But, as in the United Kingdom, getting POS terminals into stores has proved much more difficult. As of September, only 1,000 were on hand, and the task is made more difficult because all the terminals have to accommodate not just one domestic debit card scheme but several. Still, Japanese issuers are looking past the fraud problems to value-added services, such as loyalty and contactless transit and travel. The first dual-interface card should hit the streets early next year, and issuers are also working with Japan’s prominent wireless network operators on mobile commerce projects, says Masahiro Omoto, head of IC strategy for JCB International. which both issues cards and serves members as a card association. The Japanese banks and credit card companies see EMV as a way to encourage consumers to reach more often for cards when they make retail purchases, not cash, which accounts for as much as 95% of retail transactions. “That’s one reason we’re pushing EMV,” Omoto says, noting that issuers will be ordering more cards with 32-kilobytes of memory for applications and data, moving up from 16K, he says. Just a matter of time... « Prev Msg Thread Next Msg Thread » This message has been viewed 45 times Report a BullBoards Violation Ignore walt12 Post Non-Threaded View [ Next Thread | Previous Thread | Next Message | Previous Message ] |