Preparing for EMV Cards


Challenges and recommendations in issuing smart-chip cards

By Render Dahiya

On Background

The computer-chip standard for credit and debit cards known as EMV derives from Europay, MasterCard and Visa. Those three organizations initially conceived and developed the EMV standard to ensure the security and global interoperability of chip-based payment cards. The standard is now defined and managed by the public corporation EMVCo LLC.

Increased regulation and new technologies have transformed the banking and payment industries over the last decade. Our industry is constantly evolving, and at present, the next big leap in that evolution is EMV smart-chip security technology.

With an estimated 1.5 billion cards in circulation globally, EMV smart-chip technology is the global standard in payments, according to the EMVCo LLC, the governing body for EMV chip technology. Pioneered in response to rampant fraud, much of Europe adopted the technology nearly two decades ago. As a result, instances of fraud have dropped in EMV-compliant countries, including the United Kingdom where, since 2004, fraud occurrences have decreased by more than 60 percent, the Federal Reserve Bank of Atlanta reports.

The United States accounts for nearly 50 percent of annual global card fraud, according to The Nilson Report. That’s remarkably high, considering only 27 percent of all card transactions take place here. In response, Visa and MasterCard are driving their EMV roadmaps forward and maintaining an April 2015 deadline for integration across the payments chain. In addition, recent high-profile data breaches have launched EMV smart cards to the forefront of the U.S. payments conversation, but how and when EMV will become commonplace in the U.S. economy remains to be seen.

Arroweye Solutions has been working with the Smart Card Alliance EMV Migration Forum to find beneficial solutions to the challenges of deploying EMV smart cards. Part of those efforts has been meeting with community banks to listen to their concerns about incorporating EMV into their portfolios.

The challenges for community banks mainly involve three areas:

1. Cost. EMV chip cards are up to 10 times more costly to produce than magnetic stripe cards. For community banks, that’s a significant increase in program costs that could have serious implications on operations.

2. Complexity. Switching to EMV chip cards is not as simple as inserting a chip into a card. Integrating EMV technology into a payment card is complex, and card materials, chip size and chip programming are just a few of the variables.

3. Uncertainty. EMV discussions are ongoing, so there are still many unknowns about its integration, including whether the U.S. standard will be a chip-only or a chip-and-PIN card. The Durbin amendment imposed stronger debit regulations, including routing requirements, which were a substantial obstacle to adopting EMV smart-chip cards. The industry has proposed three solutions to maintain merchant choice in debit routing, but as full EMV integration approaches, obstacles like this will certainly continue to arise.

Questions still remain regarding the role of other payment platforms once EMV technology is integrated in the United States. Mobile payments and Near Field Communication technology are still being developed in tandem with EMV implementation plans, raising questions on the long-term sustainability of plastic card-based payments.

Recommendations for Integrating Smart Chips

Rethink how your bank views cards. Payment cards are viewed as a commodity and issuers are accustomed to producing cards at the lowest possible cost-per-unit. EMV will force issuers to more carefully consider how costs are associated with a card’s lifecycle, from production to fulfillment and through reissuance.

Tap into expert resources. EMV is a complex topic and navigating your community bank’s transition to adopting the technology can become overwhelming. Reach out to a production partner or EMV consultant who can help your bank develop a strategy that’s unique to its card program operations. Ask questions related to choices in card materials, chip size and programming, the benefits and pitfalls of dual-interface options, and consider how much flexibility your bank needs to respond to changes in the future.

Leverage cost-efficient technologies. While the cost to produce EMV chip cards is exponentially higher than magnetic stripe cards, those costs don’t have to jeopardize your community bank’s bottom lines. If you haven’t yet, it’s time to consider no-inventory production models that provide the flexibility needed to keep production costs low and eliminate inventory costs.

Maintain flexibility and take it one step at a time. EMV technology will undoubtedly be at greater risk for regulation once it takes hold in the United States. Because of the high cost of EMV chip card production and shorter card lifespan, it’s critical to explore production models that can provide the flexibility to cost-effectively and quickly respond to regulatory changes. With a flexible solution, your bank should be able to test its EMV technology deployment within one or several individual card programs, evaluate the results and use what it learns to expand EMV into the rest of its card portfolio.

EMV integration isn’t going to happen overnight and magnetic stripe technology isn’t going away. Expect to see EMV chip cards with a magnetic stripe component for a few years as merchants slowly upgrade point-of-sale equipment. The card industry’s evolution will continue after EMV is integrated. The key to continued success will be finding ways to embrace advancements and make them work for your community bank.

Render Dahiya ( is CEO of Arroweye Solutions Inc. in Chicago that provides card marketing and production to the payment card industry. Under his leadership, Arroweye became the first ever to receive Visa certification to manufacture and print the Visa logo on-demand. He is a member of the Young Presidents’ Organization, a global networking organization for corporate executives.