EMV and NFC: Complementary Technologies that Deliver Secure Payments and Value-Added Functionality
T
wo technologies, EMV and NFC, are catching the eye of the payments industry in the United States. EMV, a global standard for payment transactions made using smart credit and debit cards, protects against counterfeit card use and skimming. NFC, a group of short-range wireless technologies, enables proximity-based communication between applications on two compliant devices, such as a smartphone and a tablet or similar electronic device. Used in Europe since 1966, EMV is currently being adopted in the United States. The four major U.S. payment brands are committed to near-term implementation of EMV-compliant cards and payments infrastructure. Moreover, beginning in 2015, liability for fraudulent payment transactions will shift to the non-EMV compliant party to a transaction. Any EMV-compliant card can be accepted by any EMV-compliant POS terminal or ATM that accepts the brand on the card. NFC-enabled devices can operate in three different modes, including card emulation. An extremely simple man-machine interface facilitates the use of NFC for functions including smart posters, mobile coupons, mobile advertising, and mobile payments. NFC applications hosted on a smartphone use the secure element in the phone as a tamper-proof environment to store data, perform cryptographic functions, and protect transactions. As smartphones become more ubiquitous, consumers are increasingly using them to complete financial transactions, evaluate products and services while actually in a store shopping, make purchases in a store, and participate in merchant loyalty programs. NFC represents a unique opportunity for retailers to build loyalty with current customers while attracting new customers. NFC mobile payment applications are already surfacing, with prominent deployments in the U.S. Banks are likely to issue EMV cards widely by 2015 in preparation for the fraud liability shift. These events suggest that implementing EMV coincident with the spread of NFC makes sense. The resulting three candidate payment technologies—contact EMV, contactless EMV, and NFC operating in contactless card emulation mode—are interoperable within a payment brand. EMV-compliant mobile payment applications on NFC-compliant mobile handsets are compatible with the EMV contactless acceptance infrastructure that supports cards. Payment applications offered with companion plastic cards can ensure acceptance by merchants without contactless readers. Although chip cards and mobile devices both require more complex certification and personalization than magnetic stripe cards, payment applications can be installed on a mobile device and personalized over-the-air. In the longer term, overall issuing costs should decrease, as mass compromise and reissuance scenarios become unnecessary and the number of plastic cards decreases.
Consumers should find the safety and security of compromise-free cards appealing. NFC mobile contactless payments also offer the potential for additional functionality. Payment applications can reside in a mobile wallet that houses other payment-related functions, such as coupons, transit tickets, and loyalty applications. Such applications are also technically feasible on multi-application chip cards or in the cloud, but the user interface built into a mobile device makes using these applications on such a device easier and more appealing. Merchants should consider implementing EMV on the same schedule as acquirers and processors and prepare for both contact and contactless EMV payments. Doing so minimizes their fraud exposure after the liability shift, ensures that all of a merchant’s customers, both U.S. and foreign, can use their cards and mobile devices to perform transactions, reaps the benefits of the PCI audit and account data compromise relief offered by the payment brands, and positions merchants to accept NFC EMV mobile contactless payments as well as other NFC retail applications (e.g., loyalty programs, coupons, and special offers). By adopting EMV, the U.S. payments industry could move to the head of the pack, deploying EMV contactless and NFC-enabled EMV mobile contactless payments. Fraud can be reduced, and the next generation of payments innovation can flourish.
About the White Paper The Smart Card Alliance Payments Council developed this white paper to answer questions about EMV and NFC for merchants, issuers, acquirers/processors, and the mobile and NFC communities. It provides an overview of EMV and NFC technology, delineates their relationship to each other, and describes the ecosystem that supports NFC mobile EMV contactless payment provisioning and transaction processing. It explains how contactless EMV works with an NFC mobile device and how the two technologies complement each other. Participants involved in the development of this white paper included: Accenture LLP; Acumen Building Enterprise, Inc.; Apriva; Capgemini USA Inc.; Chase Card Services; Clear2Pay; Connexem Consulting; Consult Hyperion; Datacard Group; Exponent; First Data Corporation; FIS; Gemalto; Giesecke & Devrient; Heartland Payment Systems; Identification Technology Partners; Infineon Technologies; INSIDE Secure; Interac Association/Acxsys Corporation; NACHA – The Electronic Payment Association; NagraID Security; NXP Semiconductors; Quadagno & Associates; TSYS; Visa Inc.; Watchdata Technologies Pte Ltd.
Smart Card Yearbook 53