A New Era Ushers in EMV and NFC

For North America, EMV and NFC were just ideas.  Now, the times are a-changin’.

It’s times like these… rare opportunities where industry lifers like myself (you know… those who seemingly started working in payments as soon as they could count and never left) get to do a little happy dance and say to the faces of the naysayers… “See?  I told you so!”

Ok… so now that the 8 year old in me has left… let me explain what I’m talking about.  The last couple of weeks have been a game changer in the Payments industry… in both Canada and the US.  Two pretty historic decisions have taken place that will change the face of credit card processing for the next decade.

EMV Comes to the US

First, the US has officially announced that they are going to EMV.  And this is momentous.  EMV (chip and PIN) has been around in Europe and Asia for almost 2 decades.  Canada started to talk about EMV about 10 years ago and there was a lot of resistance from the merchant community at first.  The costs of upgrading devices to be EMV-capable was high and without chip cards in market, there just didn’t seem to be any sense of urgency.  It wasn’t until the card brands laid down the liability shift that merchants really started to pay attention. Now chargebacks were on the hook and to be liable to fraudulent chargebacks was a hefty price to pay for some merchants.

But there were still those merchants, and some large, well-known ones, I might add, who decided on the “wait and see” approach.  They didn’t believe EMV would ever take off in Canada, especially since our much larger and more prominent neighbour in the US had announced they had no plans to adapt.  But as time passed, it became more and more evident with the Issuers issuing chip-enabled cards that EMV was a reality and I would say that it’s only in the last year or so that we can honestly say that we’ve hit critical mass in merchants being EMV-enabled.

Walmart Paves the Way for EMV

The US had initially rejected the idea of EMV mainly because of the complexity involved with its banking system.  In Canada, we really only have 5 major banks to coordinate.  In the US, they have over 500 banks.  The sheer volume of banks makes this undertaking extremely daunting.  However, Walmart, arguably the largest merchant in North America, threw the gauntlet down when they announced that they will be enabling EMV in all their stores in the US.  What Walmart saw was that the fraud that was in Canada was migrating to the US as more and more Canadian merchants enabled for chip and PIN.  Fraudsters went to the place of least resistance… which at this point, is the US.  This is undoubtedly a huge project that will take several years to complete and it could be even longer before we see critical mass in the US.  But it’s coming.

Meanwhile, NFC Transactions are Coming to Canada

The second huge announcement was that the Canadian banking systems have agreed on a set of specifications that will be the groundwork for mobile NFC (Near Field Communications) transactions.  And last week, we saw a joint announcement with CIBC and Rogers Communications indicating that they will be launching mobile applications in the near future.  Mobile transactions have been seemingly a pipe dream to some as Canada has always had the reputation of being a little slow on the uptake of technology.  But with this announcement, it marks the beginning of a new type of payment transaction.  All the card brands have released the contactless mobile specifications for the Issuers to review and I would estimate that we’ll start seeing our first mobile transaction pilots happening in about 12-18 months.

EMV and NFC on the horizon:  these are exciting times!


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Matthew Hunt has been helping small businesses get set-up with Canadian Merchant Account Services since 2007 and helped 1000's do so. Join Matthew on Google+.

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