By Xavier Giandominici, Vice President, Americas and Financial Services at FIME
For issuers and merchants alike, fraud is an unwelcomed part of the payments industry. To take counterfeit card fraud out of the system, the U.S. is migrating to EMV chip technology.But for this to work, both issuers and merchants need to make the switch.
The Oct. 1, 2015 fraud liability shift was a good incentive, and there has been a lot of progress so far – the U.S. Payments Forum (formerly the EMV Migration Forum) says more than half of the cards in the market today are chip cards, and 1.2 million terminals are enabled to accept chip.
But there’s still work to be done. Many merchants cannot yet accept chip cards because the payments applications developed by their VAR, ISO and ISV partners or themselves have not yet been certified, leaving them susceptible to fraud—and chargebacks. Chargebacks for card-present transactions increased 50 percent following the liability shift, according to research from First Annapolis Consulting Inc. While not all of this is due to chip card migration, it is nonetheless motivating merchants to try to accelerate their chip card acceptance programs.
Some of the card brands have announced changes to their chargeback policies, putting a cap on the amount that can be charged back, as well as the number of chargebacks per account. In a statement from American Express, Mike Matan, vice president of Global Network Business said their changes are intended to “provide flexibility to those merchants that may need more time to upgrade their point-of-sale terminals to accept EMV chip cards.” These chargeback announcements came shortly after individual announcements from American Express, Discover, MasterCard and Visa regarding faster EMV solutions, intended to speed up in-store transactions, as well as new self-certification options from some networksintended to help acquirers bring EMV solutions to market faster.
Regardless of the motivator, more and more merchants are trying to get through the certification process, which has overwhelmed the industry’s resources and created an industrywide backlog. This not only adds to the wait to begin accepting chip cards, but also leaves the door open to more fraudulent transactions and resulting chargebacks.
Fortunately, there is a way for merchants to get through the backlog and get certified faster, whether they’re implementing a traditional or faster EMV solution. By following these proven and basic pre-certification procedures, they can virtually guarantee successful certification, shortening the time to market for chip card payment acceptance:
- Pre-test. The simplest approach to minimizing certification test issues is to pre-test an application using payment brand-approved test plans. Unfortunately, many merchants and POS partners do not even know these tools exist. This basic step makes it highly likely an application will be certified.
- Use a brand-approved testing platform. EMV chip cards might be new to the U.S., but they are not a new technology. Over many years, the payment brands have evaluated and certified test tools that can help you achieve certification. Best-in-class tools do much more than just test – they provide guidance throughout the process, reduce the time required and automate testing and analysis tasks. They can also submit test reports according to payment brand requirements.
- Consider plug-and-play chip card applications. Universal EMV application frameworksare open platform interfaces that provide a pretested, easier way to develop a chip card payment application that can work with many different POS terminals. It gives integrators an alternative to developing their own EMV applications using POS-vendor specific interfaces. Essentially, these frameworks provide an EMV Software Development Kit (SDK) and a Level 2 kernel, or application core. With their universal design approach, these can be used with any of the most common EMV terminals and PIN pads. Since these applications are pretested, they reduce the development time and the qualification and certification workload. Over the long-term, ongoing maintenance and updates are reduced, a significant advantage. Maintaining oneuniversal EMV SDK and Level 2 kernel reduces the number of certifications, and allows for future proof EMV application investments.
- Isolate sales functions from chip card payment processing by usinga “semi-integrated” payment solution architecture.Many POS systems integrate sales and payment into one common system. A best practice for small to medium-sized merchants is to implement these as separate solutions that communicate with one another. A semi-integrated approach introduces the least amount of complexity to the development and certification processes, especially when compared to a fully integrated system. It also enables changes to be made to the sales functions more frequently and without re-certifying the payments portion of the system.
- Go pro. The most important recommended best practice is to add a chip card payments specialist to the team in a consulting capacity. While chip card acceptance seems to be easy when looked at superficially, even an experienced and excellent POS developer who is a chip card rookie will easily get tripped up. Cramming all that security and technology into the small computer within a chip card that communicates with bits and bytes can be complex. Using a chip card pro, who knows these complexities inside and out, can help to ensure certification.
While the certification process is seemingly daunting, it’s important to acknowledge the importance of the migration to EMV chip payments. The transition is modernizing the U.S. payments ecosystem to align with the global common standard for payments, and opens the door to new opportunities to support future evolutions that are interoperable with the rest of the world.
Following these best practices can help merchants shorten their implementation cycle, get their EMV chip card payment acceptance into the market more quickly, and ensure that when they get to the front of the certification queue they will get approval.
This information has been summarized and excerpted from the FIME eBook, “A Management Guide to Accelerating EMV Chip Card Acceptance,” which can be downloaded at https://www.fime.com/ebooks/a-management-guide-to-accelerating-emv-chip-card-acceptance.html