From a financial institution standpoint, the biggest benefit of EMV chip cards lies in its powerful fraud prevention technology inherent in the chip. Because every EMV card is essentially a small, secure computer, EMV cards are nearly impossible to counterfeit. By replacing the current unencrypted magnetic stripe with a chip embedded in the card, smartcard technology adds dynamic data to the transaction process, making it far less vulnerable to fraudsters.
- The adoption of EMV in other parts of the world has significantly reduced card fraud in those regions. Although the U.S. is no stranger to fraud, payment card fraud is now logically following a path of least resistance to even more aggressively ply its trade in America. The migration of fraud from EMV-enabled countries to the states is already underway. Between 2009 and 2011, the percentage of the world’s payment system compromises centered on the U.S. rocketed from 38% to 67%.
- Currently, credit union card issuers absorb $430 million in fraud losses split between $206 million in card-present (CP) and $224 million in card-not-present (CNP) transactions. Based on other countries’ EMV experiences, EMV deployment will cut those fraud losses by 40% to 60%, which will generate up to $248 million credit unions could return to their members in the form of lower loan rates or higher dividends.
Additional benefits include:
a) Attracting and engaging more high value, international traveling members.
The number of merchant locations overseas where consumers can use mag stripe cards is diminishing, which is a source of frustration, particularly at unattended EMV terminals, for many travelers who carry mag stripe cards. EMV cards appeal to high value members who travel internationally; and military personnel and students overseas. As U.S. merchants and issuers convert to the EMV standard in the coming years, EMV will empower credit unions to attract and engage more members.
b) EMV is a gateway to continued payments innovation.
It is no big stretch to picture today’s EMV cardholder as a credit union’s next mobile payments channel adopter. EMV and NFC are two near-term game changing technologies that put a tremendous amount of transactional power in the hands of consumers and merchants. EMV’s chip technology is a foundational building block for future mobile payments methods – EMV forms the game changing payments DNA that will unlock a multitude of new transaction experiences for consumers.