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NFC and EMV face ambivalence, uncertainty

Though the transition to EMV seems all but inevitable, card-issuing banks still don't know exactly what EMV standards look like, said an article from American Banker.

"We look at the swirl of things going in payments, such as RFID, ISIS, Google Wallet, Visa Wallet, etc.," David Porter, a general manager for JPMorgan Chase,said in the story. "However long it takes, it will settle on the next universally updated payment methodology in the U.S., which we still don't know at this time."

The problem is that as yet, no standard model has emerged for processing NFC or EMV payments. This has had the effect of slowing conversion and requiring IT execs to use multiple strategies. "We have to be sure to be prepared in the back office and make sure our systems can process mag stripe, EMV or contactless payments,"  Porter said in the story.

Walmart has been pushing EMV adoption for years; Visa and MasterCard have set EMV migration deadlines for October 2012. Visa has said that merchants who do 75 percent of their transactions via chip card by then will not have to validate compliance with PCI DSS. By April 2013, acquirer-processors and sub-processors must support chip transactions. By October 2015, liability for fraudulent transactions will fall mostly on merchant acquirers if merchants don't have chip-accepting terminals. MasterCard has said it will require EMV acceptance at U.S. ATMs as of April 19, 2013.

Card brands also differ over methods for EMV card acceptance. While MasterCard and Discover want Chip and PIN, Visa has said says that the security of online processing removes the need for the offline authentication of Chip and PIN.

To further complicate matters, many in the industry believe that merchants should upgrade payment terminals to accept mobile payments and EMV acceptance capabilities at the same time. "The contactless part is very important," says Zilvinas Bareisis, a senior analyst at Celent. "The link between contactless terminals and EMV payments ensures that not only are these terminals accepting chip payments, but it's a way to ensure they are paving the way for mobile payments as well."

But implementation of contactless and EMV standards remains stymied because in the U.S they really aren't "standards" at all. Disputes and non-cooperation persist in the NFC payments market, as telecoms and handset manufacturers argue for their preferred approach. What's more, issuers, merchants, card firms and regulators in the U.S. still aren't agreed on liability, the burden of terminal conversion or the politics of implementation.

While EMV in the U.K. was enabled by a collaborative effort including the government, bank users and associations, U.S. interests have failed to fall into alignment. Until that happens, no one wants to pay for terminal conversion, which Javelin Research estimates could cost as much as $12 billion. Of course this assumes that the industry could actually reach agreement on who should pay, or how.

For more stories like this, visit the carriers/card brands research center.

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