will us emv migration impact acquiring worldwide?...will us emv migration impact acquiring...
TRANSCRIPT
4th PSE Merchant Acquiring Conference
Will US EMV Migration Impact Acquiring Worldwide?
London, November 27th, 2014 Gérard de Moura
20141127-PSE Acquiring Conf-US EMV Migration-v1
About Galitt Key Figures
• 2013 Sales: 29M€ • 8% outside of France
• More than 150 active customers • 240 staff, experts in Card
Payment Systems (including 170 consultants)
• Privately owned
More than 20 years of experience
2 Business Units
• Consulting & Assistance: From strategic choices to system implementation via system design and support
• Engineering & Technology: From specific development to software products via system integration and processing
• Since 2006 • HQ in San Francisco, CA • Operations in Chicago, IL • Turnover $800k
• French Member since 2007
Breakdown of 2013 Business Lines Target Markets
• Banks & PSPs • Payment Brands • Card & Terminal Vendors • Retail & Oil Companies • Government & Transport
Training Business Analysis
Professional Services
Projects
Solutions
Testing Software
© Copyright Galitt 2
US EMV Migration – Table of Contents
3
1. US EMV Migration in a nutshell
2. Chip & Choice
3. POS Certification Challenge
4. Debit Routing Rules
© Copyright Galitt
US Card Market
• Cards > 1B • > 3 per inhabitant
• Banks = 14,000 (117,000 branches) • Including more than 5,000 issuers
• Including 7,000 Credit Unions
• ATM # 430,000 • Withdrawals = 12B (2008)
•Merchants ≈ 9M • 1.9M POS sold in 2012
(9.3% of the worldwide market)
• Acquirers / Processors ≈ 100 • Top 5: $2,693B – 53B transactions
• Transactions = 73B (2011) • Credit = 24B (≈$90/transaction) • Debit = 49B (≈$25/transaction)
© Copyright Galitt US 4
Sources: Bank for International Settlements, Committee on Payment and Settlement Systems (figures 2012) – Nilson Report – Discover – Galitt US (estimates)
US Debit Networks
© Copyright Galitt US 5
Liability Shift Dates
• Initial announcement by Visa (August 9, 2011) • MasterCard (January 30, 2012) – Discover (March 15, 2012) – Amex (June 29, 2012)
• Ambiguity Contact / Contactless • Regional Debit Networks
• Followers (with or without formal statements)
© Copyright Galitt US 6
2013 2014 2015 2016 2017
Acquirer Mandate
(April)
POS Liability Shift
(October)
AFD Liability Shift
(October)
ATM Liability Shift
(October)
ATM Liability Shift
(October)
EMV Migration Forum (EMF)
• Cross-industry body focused on supporting the EMV implementation steps
required for global and regional payment networks, issuers, processors,
merchants, and consumers to help ensure a successful introduction of more
secure EMV chip technology in the United States.
• http://www.smartcardalliance.org/pages/activities-emv-migration-forum
© Copyright Galitt 7
US EMV Migration – Table of Contents
8
1. US EMV Migration in a nutshell
2. Chip & Choice
3. POS Certification Challenge
4. Debit Routing Rules
© Copyright Galitt
PIN or Signature: Cardholder's Choice
• US Debit transaction • PIN
• Single message
• US Credit transaction • Signature
• Dual message
• Debit transaction processing • PIN-preferred Merchant: PIN or cancel (the PIN entry!)
• PIN-neutral Merchant: Debit (=Pin) or Credit(=Signature)
• PIN or signature • Supported by Visa, MasterCard, Discover
• PIN only • Supported by most Regional Debit Networks
© Copyright Galitt 9
PIN or Signature: a US Dispute
© Copyright Galitt 10 www.whitehouse.gov
creditcards.chase.com
www.bankofamerica.com
US EMV Migration – Table of Contents
11
1. US EMV Migration in a nutshell
2. Chip & Choice
3. POS Certification Challenge
4. Debit Routing Rules
© Copyright Galitt
Lack of (common) Terminal Specifications
• Terminal requirements issued by every Payment Scheme • Existing for credit
• Recently released for debit
• Still pending issues for some contactless debit
• Lack of governing body • Antitrust law apparently preventing cooperation
• Fierce competition between Payment Brands
• Payment "Implementation Guides" to be provided by the Acquirers/Processors • Varying according to verticals and retailers
• Varying depending of acquiring platforms
© Copyright Galitt US 12
Terminal End-to-End Certification (also known as "Terminal Integration")
• One procedure per Brand • "EMV Testing and Certification White Paper:
Current U.S. Payment Brand Requirements for the Acquiring Community"
• Regional Debit Networks coming soon
• Complexities and large numbers of merchants and systems to be certified
• “Tons” of targeted systems: from 3,000 to 1,000,000 (depending on estimates!)
• 1,000’s of VARs/ISVs without available resources and EMV chip experience
• Greatest short term challenge for the migration
• Simplification required by Acquirers/Processors (via the EMF)
• EMVCo Terminal Integration Task Force, addressing "Level 3"
"Brand-aligned Terminal Integration Testing Framework" (November 1st
, 2014)
• US Payments Security Taskforce: VARs & ISVs pre-certification process
• Processors & Service Providers enablement being considered
© Copyright Galitt US 13
US EMV Migration – Table of Contents
14
1. US EMV Migration in a nutshell
2. Chip & Choice
3. POS Certification Challenge
4. Debit Routing Rules
© Copyright Galitt
Dodd–Frank Act & Durbin Amendment
• Dodd–Frank Wall Street Reform and Consumer Protection Act • Federal Law signed by Barack Obama – 7/21/2010
• Regulation addressing he financial sector (243 rules!)
• Senator Dick Durbin's Amendment • Debit interchange fee
• "reasonable and proportional to the actual cost" • FED empowered to rule the debit market
• Right of refusal for merchants (based on amount)
• No more “Honor All Cards”
• FED initial ruling • Cap on per-transaction fee
• $0.21 + 0.05% + $0.01 for additional security measures (authorization)
• First target was $0.12 per transaction
• Only for Financial Institutions with total assets > $10B
• At least 2 Networks owned and processed by different company on every card
• Merchants to determine the transaction routing (to select the processing network)
© Copyright Galitt US 15
Debit Transaction Processing
© Copyright Galitt US 16
NETWORK 1
(ex. MasterCard)
NETWORK 2
(ex. STAR)
ISSUER
PROCESSORS
GATEWAYS or
STORE BACK-OFFICE
ROUTING RULES
Durbin & EMV?
• EMV Specifications at stake? • Cardholder choice (EMV) vs. merchant routing (Durbin)
Î Disputed understanding of the specs
• Request for EMV specifications Change
Î Rejected by Payment Brands (Schemes)
• 2 competing implementation options • Multiple AIDs on card: US tag + POS routing
Î Rejected by merchants’ associations • Unique US debit AID on card: no change in the current routing
• Convergence on “one unique” “Common US debit AID” per card
• Visa US Common Debit AID (VIS VSDC )
• MasterCard US Common Debit AID (M/Chip PayPass™)
• Discover US Common Debit AID (D-PAS )
• Debit Network Common Debit AID (proprietary) to come
© Copyright Galitt US 17
Galitt Contact
18 © Copyright Galitt
Gérard de Moura Managing Director Galitt – President Galitt US
+33 612 118 812 / +1 650 200 7659 [email protected]
Contact
www.galitt.com & www.galitt.us
Thank you!