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An article relating to this blog post on Finextra:

Target names DeRhodes CIO; partners MasterCard for chip and PIN

Target has hired industry veteran Bob DeRodes to overhaul its security efforts in the wake of its recent massive data breach. The retail giant has also outlined plans to incorporate MasterCard chip an...

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Payment Security in USA through EMV or Mobile?

Recent high profile data breaches at the POS and compromise of cardholder account data have certainly led to the popular notion that payment security at the POS needs to be tightened through EMV; no wonder, Target has announced plans for Chip and PIN EMV by partnering with Mastercard.

Before spending some 8 B$ (according to Javelin Research) to upgrade POS terminals to EMV, USA should certainly ask itself if it makes sense to do that only to catch up with other countries who have had EMV for years. How about leapfroging other countries in payment security and innovation while spending the 8 B$? Certainly a respectable goal.

Mad migration to EMV in USA driven by fear of POS data breaches is less desirable as it fails to recognize some unstoppable trends:

  • Consumer lifestyles are moving online and more payments are migration to card not present transactions. How many people pay taxi drivers with their cards? Most allow the taxi companies to charge the card on file. How many people buy movie tickets with the card in their wallet? Most buy online before going to the theater through a card not present transaction even though their card was sitting in their wallet.
  • Mobile channel is increasingly becoming the payments control center for both consumers and businesses by serving as an additional channel of authentication for online transactions as well as a command center for how and when card transactions are authorized and which cards are to be used for which transactions.
  • Consumers are internet savvy and used to 1-click shopping. It is so yesterday to still serve them with POS terminals and checkout queues at retail stores. Any significant investment in payment technologies should be accompanied by transformation of the shopping experience at the store.

Currently, issuers take on the liability associated with POS transactions and merchants take on the liability associated with online transactions. With the unstoppable move to mobile and online, merchants will be responsible for fraud liability in online transactions in the future anyway.

Merchants and retailers who plan to shift fraud liability to issuers and networks by upgrading POS to EMV may lose out on the bigger race to online, mobile, next generation shopping experience and store transformation.

What do you think? Does it make sense for USA to spend some 8 B$ on EMV only to catch up with other countries? Or should it leapfrog the other nations in next generation payments?


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