Visa, in an announcement that likely resulted in cheers on the other side of the Atlantic, unveiled on Monday plans to expedite the implementation of chip-based credit card technology within the United States. The European Payment Council has long been pushing for the U.S. to adopt so-called EMV standards, which by all accounts provide for dramatically increased credit card security as compared to magnetic stripe technology, which has been a staple of the U.S. credit card industry since the 1960s.
According to Visa, the move will not only provide for global credit card inter-operability, but will also go a long way in establishing the infrastructure necessary to handle payments based on Near Field Communication (NFC), the contactless technology driving virtual wallet applications that are already available in certain Android smartphones and are planned to be part of future versions of the iPhone.
The company says its decision to begin this process now came as a result of major issuers beginning to offer chip-and-pin cards in response to consumer demand as well as a general acknowledgement that the future of credit cards indeed lies in contactless, chip-based technology.
"By encouraging investments in EMV … technology, we will speed up the adoption of mobile payments as well as improve international interoperability and security," said Jim McCarthy, the global head of product for Visa. "As NFC mobile payments and other chip-based emerging technologies are poised to take off in the coming years, we are taking steps today to create a commercial framework that will support growth opportunities and create value for all participants in the payment chain."
Visa’s plans to fast-track the structural support for these emerging technologies hinge on incentives for both merchants and issuers. For instance, the company will waive the Payment Card Industry (PCI) Data Security Standard—a multi-million-dollar-a-year burden—for merchants with 75% of annual transactions originating from chip-based terminals that allow both contact and contactless payments and do not store personal financial data, such as account numbers. The company is also planning a fraud liability shift from the issuing bank to the merchant’s bank for merchants who cannot process chip-card payments.
Both this proposed means of implementation and Visa’s announcement in general have received widespread support from the personal finance community.
“Visa is definitely on the right track here,” said WalletHub CEO Odysseas Papadimitriou, a former Capital One senior director. “The superior fraud prevention capabilities of chip-based cards have long been recognized, but the cost of implementing the infrastructure necessary to support it was always an impediment. Waiving the merchant PCI requirement, which won’t be necessary with chip-based cards anyway, clears this hurdle. And now is the right time to lay the foundation for credit cards of the future given smartphone trends and the growing concerns of consumers, from both the U.S. and Europe, about international credit card compatibility.”
