the multichannel issues and opportunities of emv 2.0

shaping the future of payment technology

The Multichannel Issues and Opportunities of EMV 2.0 Dr. Andreas Strobel, President, SPA

Tuesday 19th November 2013


A short introduction01.


Who we are

The Smart Payment Association addresses the challenges of today’s evolving payment ecosystem. We offer leadership and expert guidance to help members and their financial institution customers realize the opportunities of smart, secure and personalized payment systems and services - both nowand in the future.

Since 2004

Members:

shaping the future of payment technology4

What we do

The SPA works in partnership with global standards bodies, its own vendor community, and an expanding ecosystem of established and emerging brands to offer an ever-growing portfolio of advisory and support services.

Fig 1Extending advisory and support across the evolving community, the SPA is addressing today’s challenges and shaping the future direction of payment technologies, standards and business models.

Ecosystem Expert Advisor ServicesHelp shape the future of payments

Members Customers ServicesBring Value to Financial Institutions

Members ServicesTrade Organization

Non- Traditional

Traditional / Smart Card Advanced/ New

Customers

Technologies

2013/11/19 • Mulichannel and EMV 2.0


The evolution of retail payments02.


Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach

Cash Cards

OnlineE-commerce

MobileM-commerce

PrepaidCommercial

Credit transfers/Direct debit

EFTCredit cards

Google checkoutPayPal

Click and buy1-Click

NFCAppsSMS

P2P Payments

Consumer

Payment channels

Payment means

Paym

ent sch

em

es (V

isa, M

C, …

)

SuppliersCard vendorsProcessorsATM / POS providers

Provider payment optionsFinancial institutes

(Banks, PayPal)Non-financial institutions:

MNOsDevice manufacturersMerchants

PSP

Direct payment

Traditional payment

Newpayment

Players

Consumer

convenience

availability

security

2013/11/19 • Multichannel and EMV 2.0



Cash Cards

OnlineE-commerce

MobileM-commerce

PrepaidCommercial


EFTCredit cards



NFCAppsSMS

P2P Payments

Consumer

Payment channels

Payment means

Paym

ent sch

em

es (V

isa, M

C, …

)





PSP

Direct payment

Traditional payment

Newpayment

Players

Consumer

convenience

availability

security



An unbroken trend - Card payments continue growing across all regions worldwide

Globally in 2011

Credit card transactions volume

+12,3%

Debit card transactions volume

+15,8%

In North America65% of non cash

transactions made by payment card!

Source: World Payments Report 2013



Cash Cards

OnlineE-commerce

MobileM-commerce

PrepaidCommercial


EFTCredit cards



NFCAppsSMS

P2P Payments

Consumer

Payment channels

Payment means

Paym

ent sch

em

es (V

isa, M

C, …

)





PSP

Direct payment

Traditional payment

Newpayment

Players

Consumer

convenience

availability

security



The rise of e- and m-payments – more payments channels and non-bank providers

Source: World Payments Report 2013

CAGR 2010-14

18,1%

CAGR 2010-1458,5%

Non-Bank Providers

92,3%

Bank Providers 55,4%

Driven by smart devices & connectivity

Convenience and innovation

New players and new usages

Leading to asymmetry and fragmentation

Need for accelerated standardization



Cash Cards

OnlineE-commerce

MobileM-commerce

PrepaidCommercial


EFTCredit cards



NFCAppsSMS

P2P Payments

Consumer

Payment channels

Payment means

Paym

ent sch

em

es (V

isa, M

C, …

)





PSP

Direct payment

Traditional payment

Newpayment

Players

Consumer

convenience

availability

security



For non-cash transactions the card fraud has been declined, thanks to chip migration in SEPA

Source: ECB - Second report on card fraud, July 2013


0.036%


In e-Commerce channel the card-not-present fraud (CNP) is dominant and further increasing

Total level of fraud has reduced overall for the SEPA region

However, card-not-present transactions now represent the biggest share and the biggest growth in terms of fraud

Most of fraudulent F2F transactions with EU cards took place outside the EU

Top 6 locations: USA, Dominican Republic, Colombia, Russian Federation, Brazil, Mexico) – Source: Europol


Source: ECB - Second report on card fraud, July 201356 %CNP

Value in millions of EUR / %

Evolution of the total value of card fraud using cards issued within SEPA 1)

Transactions (millions) / %

60 %CNP

CPSs: Card Payment Schemes


The gobal EMV payment market03.


With the US and China adopting EMV the chip migration has become a global phenomenon

Source: EMVCo



975 million pcs. smart payment cards were shipped in 2012 by SPA Members*

* includes all chip payment cards – EMV represents more than 90% of SPA shipments

+23%

+39%+16%

+18%

+12%

580 798 898 418

2007 2008 2009 2010 2011

+9%

975

2012

675Mio. pcs sold



The total available market for payment chip cards is estimated to 1.2 Billion pcs. in 2012*

* 2012 Estimated Total Available Market (1166 units) by Geographies in Millions – Includes all chip payment cards

** Includes Turkey

NORTH AMERICA

TAM: 84M

SOUTH AMERICA

TAM: 225M

SOUTH EAST ASIA

TAM: 89M

NORTH ASIA

TAM: 238M

EUROPE

TAM: 322M

Payment Chip cards deployed or in advanced deployment

Chip cards in deployment

Chip cards migration initiated

No Chip cards

CISMEA** & EASTERN EUROPE

TAM: 208M


In all regions the growth of contactless cards (CTLES) was stronger than for contact cards *

CT-4 %

AMERICAS

Contact: 205 Mio.Contactless: 54 Mio.

CISMEA & EASTERN EUROPE

Contact: 164 Mio.

Contactless: 29 Mio.

WESTERN EUROPE


ASIA PACIFIC


CT+1 %

CTLES+106%

CTLES+34%

CTLES+111%

CT+26%

CTLES+17%

CT-14 %

Chip & PIN deployed or in advanced deployment

Chip & PIN in deployment

Chip & PIN migration initiated

No Chip & PIN* Comparison of SPA members shipments from 2011 and 2012


The adaption rate of DDA cards outperformed previous technology in all regions *

nDDA-7%

AMERICAS

DDA: 39 Mio.nDDA: 220 Mio.

DDA+60%

CISMEA & EASTERN EUROPE


WESTERN EUROPEDDA: 258 Mio.nDDA: 43 Mio.

ASIA PACIFIC


nDDA+7%

nDDA-33%

DDA+6%

DDA+69%

DDA+45%

nDDA-18%

Chip & PIN deployed or in advanced deployment

Chip & PIN in deployment

Chip & PIN migration initiated

No Chip & PIN* Comparison of SPA members

shipments from 2011 and 2012


EMV is a truly established global secure and interoperable infrastructure

Smart payment card shipments hit the one billion mark in 2011, and exceeded 1.1 billion in 2012

Ever increasing penetration of contactless payment (23 % in 2012)

Move towards more secure ways to pay (DDA more than half of shipments)

EMV is a truly established, global secure & interoperable infrastructure, and NFC is the contactless extension paving the ground for the evolving connected world

Discover and China Unionpay have joined EMVCo in 2013

US and China are moving to EMV

EMV has beat the fraud (Europol) on card payment but what about the online fraud?


The multichannel opportunities & issues

04.



Cash Cards

OnlineE-commerce

MobileM-commerce

PrepaidCommercial


EFTCredit cards



NFCAppsSMS

P2P Payments

Consumer

Payment channels

Payment means

Paym

ent sch

em

es (V

isa, M

C, …

)





PSP

Direct payment

Traditional payment

Newpayment

Players

Consumer

convenience

availability

security



eCommerce is the „low hanging fruit“ for organized online fraud criminals

Financial institution have made significant efforts to defend online accounts

Cyber criminals target more and more eCommerce sites

The eCommerce market is huge: In 2012 the market was about several hundred billion Euros with about >20 billion transactions

Online retailer have access to credit card details and deliver goods that criminals can resell (change of shipping address, network of mules)

Most e-Commerce sites lack fraud protection; it is unclear to customers how sites are protected; fragmentation and lack of standardization

Weak user authentication only by User-ID and password

Data breaches (of huge data bases) by hacking, insiders, malicious software

Cracking of stolen passwords to reveal user credentials by todays’ powerful parallel-connected computing devices and reselling of digital IDs


Lack of strong user authentication is one of the identified weaknesses of todays’ eCommerce

The ECB forum for Security of Retails Payments (SecuRe Pay) gave 13 recommendations to tackle Card Not Present Fraud

Source: ECB - Recommendations for the security of internet payments, January 2013

Protect the initiation of internet payments, as well payment data by means of strong customer authentication

Limit the number of log-in or authentication attempts

Transaction monitoring mechanisms against fraudulent payment transactions

Implement multiple layers of security defenses to mitigate risks

Provide more guidance and education to customers

…


EMV has the basic ingredients, but some parts are missing from SPA point of view

Security, interoperability, good user experience and a robust business model for the card issuer, constitute the four key advantages of the card technology

In general the new EMV standard should include: more interfaces, transaction independent from the interface – this is mainly covered by EMVCo Next Gen

Protocols and message structures for payment convergence; harmonizing protocols on the terminal to acquirer interface to standardize the back office

More means to include “on-card” peripherals and new card functionalities needed for strong cardholder authentication to protect high value transactions

Faster and more competitive evolution of the new standard, softening of the rigid EMVCo IP policy to ensure state-of-the-art contributions/implementations

Better collaboration between PCI and EMVCo; early mandate by Card Payment Schemes requested to adopt EMV Next Generation as soon as possible

Better positioning of the secure element as THE token which offers secure authentication and protects the privacy of eCommerce transactions


SPA’s role in bridging the gap05.


How we do it – SPA contributes and gives expert advice to leading standards bodies

By supporting the creation and adoption of standards and best practices SEPA: European Payments Council – Cards Stakeholder Group

Card Representative and Vendor Sector Spokesperson, Chair of the EPC-CSG Task Force to specify the SEPA functional and security

requirements for emergent & remote payments (Internet + Mobile), Conveyor of the new EPC-CSG Expert Team on Card Innovative Payments, Member of the Preparatory Committee of the SEPA Security Certification

Management Body

EMVCo: Technical Associate Board Advisor for Card Sector Next Generation Task Force: Contributor

By extending expert advice and support across the payments ecosystem An eye-catching library of expert technical resources and thought

leadership collaterals to shape the future of payment


Some take aways – Summary and recommendations

EMV has proven to be the global, interoperable and secure standard of choice to tackle card fraud at the physical point of sale – more collaboration needed

Despite the fact that overall fraud is decreasing (SEPA-region) the card-not- present fraud is further increasing

eCommerce transactions contribute to the major part of card-not-present fraud and are the low hanging fruits for online fraud

Strong user authentication is needed for eCommerce transactions – User-ID and password in cloud-based platforms is not sufficient anymore

NFC technology relying on certified, tamper proof secure elements is the recommended solution to tackle fraud for m-payments

Card Payment Schemes should engage stronger to establish strong user authentication for eCommerce by means of EMV and NFC technology

EMV based secure elements offer the ingredients to better secure eCommerce as compared to purely cloud based solutions


Have a look at the latest SPA publicationsand visit our web site

Biometrics for EMV Payment Cards

UICC Application Lifecycle Management

Software to Chip Fallback Solution

Security Certification for Mobile Platforms

Security for Mobile Payments

PIN by SMS

Private Label Payment Solutions

Business Continuity in the Payment Card Issuance Industry

… more publications to come the next weeks!

NEW!

NEW!



Thank You for Your attention!

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the multichannel issues and opportunities of emv 2.0

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