There has been a change
of heart in the US card market in the past three years. The
implementation of EMV technology is no longer a case of if, but
when. An Aite Group report shows that EMV is now considered the
safest technology to reduce card fraud – but there are


Bar chart showing the percentage expecting EMV migration in the USThe
introduction of chip-embedded cards in the US card market is not a
matter of if, but when.

Speculation about a change of
heart in the cards industry to migrate to EMV technology has been
rife for a long time now.

Now Aite Group has identified
EMV technology has the mechanism with the highest impact to reduce
card fraud losses and data security issues over the next three

The consultancy surveyed 76
North and South American card security professionals, almost half
of them risk management executives at issuers and acquirers, for
its From Mag Stripe to Malware: Card Security Risks 2011
report, and found that traditional mechanisms were steadily falling
out of favour.

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The report is an update on a
similar report from 2009. Measuring the perceived effectiveness of
fraud protection mechanisms and comparing the findings from 2009 to
those in 2011, the group found that EMV has overtaken E2EE
(end-to-end encryption) technology as the most suitable mechanism
to combat card fraud.

In 2009, E2EE was considered
the most appropriate method to address card fraud threats in the US
because of the entrenched nature of magnetic card

The report also focused on
the perceived impact of near-field communication technology (NFC)
as a tool to reduce card fraud.

US financial institutions are
increasing their focus on re-examining their online fraud
mitigation infrastructure, a move that was reinforced in the
guidelines of the Federal Financial Institutions Examination

Financial institutions will
have to upgrade their technology so that it does not create new
opportunities for fraud.

Aite Group found that EMV
presents the most compelling anti-fraud technology.

Over a third (36%) were
convinced in 2009 that EMV would never be introduced into the US
market. Three years on, and the sentiment has reduced to less than
a fifth of industry players.

Pie chart showing the likelihood of EMB to reduce card fraud and data security issues in the next three years in the USNow, the
majority of industry insiders think EMV has a higher impact on
reducing card fraud than E2EE, or in fact any other

But while the majority of the
banking sector in Europe has long been deploying chip-and-PIN
technology, and the industries in Canada, Asia, Latin America are
in various stages of doing so, the US card market poses challenges
for an upgrade to EMV due to the fragmented structure of the
banking landscape.

With over 1,000 financial
institutions, merchant acquirers, card networks and banks would
need a collective body to push forward chip-in-PIN technology, the
way Europay, MasterCard and Visa have done with EMV in

Compared with EMV or E2EE
technology, NFC technology is regarded by just 42% of respondents
to have an impact on reducing card fraud. In comparison to magnetic
stripe technology, the perceived impact of NFC is twice as

However, Aite argued that the
driver for implementation of EMV technology in the US will not be
card fraud losses, at least not in the near term because the volume
of card losses has been flat over the last decade.

Rather, the growing
international acceptance of EMV, as opposed to magnetic stripe
technology, will drive the deployment forward, as US card holders
face difficulties paying by card outside the US.

Aite Group argues that the
Durbin Amendment will also spur the implementation of EMV as
signature-debit interchange fees are higher than PIN-debit
interchange fees. A migration to EMV could provide a source to
recoup the 50% estimated reduction in debit card interchange

For such an adoption to take
place, however, the merchant community requires a compelling
business case – which has not been the case so far, Aite Group

Loyalty and marketing
opportunities via NFC will eventually provide compelling business
cases to spur merchants on to upgrade their terminals.

But fraud will continue to take place and migrate to
card-not-present channels – one of the most serious threats for
card protection. So industry players also need to increase their
focus on risk minimisation methods, such as through Chip
Authentication Programmes.