I know … the major news on the topic of digital payments is usually about NFC (Near Field Communication) technology; but the likelihood is that EVM is going to impact you before NFC does. This is because NFC is a credit card replacement technology being promoted by companies like PayPal, Amazon and Google, whereas EVM is an upgrade to existing credit card technology focusing on the current big-names like Visa and MasterCard. Merchants are more likely to be forced to embrace EVM before they find it necessary to convert to NFC, merely for customer convenience or technological chic. In fact, you as a cardholder may already have EVM-capable plastic in your pocket … just look for a small, brass-looking metallic chip on the face of the card!
EVM stands for EuroPay, Visa and MasterCard – the consortium behind the evolution of credit card technology. AmEx recently joined the consortium, likely to avoid being left behind in the global payment technology revolution. By integrating a microchip onto the physical credit card, the card networks are making fraud even more difficult by making cards harder to imitate, as well as securing the data transmission from point of purchase to completion. For card-not-present transactions, there is a technology called EMV-CAP or EVM-DPA which substitutes the presence of the chip with a PIN or other validation method for online or phone orders. A secondary goal of EVM is to assure global interoperability using international standards – an important consideration for world travelers to ensure their card’s microchip will work anywhere.
The EVM technology also includes communications standards for payment processing devices and gateways to secure against unauthorized transaction data interception. This is designed to identify a payment terminal or gateway network that has been compromised, allowing for potential release of sensitive cardholder data. Even in the event of a compromise, the difficulty in mimicking encrypted data on the card’s microchip protects against unauthorized transactions. For this reason, the more common identity confirmation method will become a PIN (personal identification number) rather than a cardholder signature. Chip-and-PIN technology is considered more secure even than chip-and-signature, since there is no current method of digital signature comparison, whereas the PIN that is entered can be instantly validated against the one encrypted on the card’s microchip.
Merchants are more likely to be forced to embrace EVM before they find it necessary to convert to NFC, merely for customer convenience or technological chic.
EVM technology has already been widely implemented across Europe and parts of Asia. Visa, MasterCard and Discover all announced their intent to introduce this technology in the U.S. retail marketplace as early as April 2013. If it is a mandate placed upon merchants who accept these types of cards, this will represent a significant re-investment for merchants to replace current magnetic stripe readers with EVM chip readers. As I stated earlier, this would imply that EVM is a more important mandate than NFC reader implementation because the catalyst behind NFC is primarily alternative financial institutions along with device manufacturers, and merchants can choose whether or not to add new payment types to their existing platforms but cannot easily remove popular, existing payment types. The drive to replace a credit card with an NFC-equipped cell phone may not be as important to merchants if the potential exists that almost every credit and debit card coming across their counters requires a new card reader type. It’s simply the cost/benefit analysis of what they’d like to accept versus what they MUST accept for payment technologies.
One of the drawbacks for merchants is that by not adopting EVM technology by the proposed April 2013 deadline, the cost of accepting credit card payments traditionally can go up in the form of higher interchange rates and costs associated with fraud liability claims that will be shifted from the card issuer to the merchant. For the foreseeable future though, EVM cards will still contain magnetic stripes in order to be accepted at non-EVM merchants; but either way, the costs will fall on the merchant either in higher rates or in new technology investments.
