An Update on Chip
September 26, 2007
Memorial University of
Newfoundland
What is a Chip Card?
• A microchip embedded in a debit or credit card
• Chip cards can store and process data securely
• The data on the chip is extremely difficult to copy or change providing
increased protection against counterfeit and lost and stolen card fraud
2
What is EMV?
The established standard for chip cards and
terminals was developed by Europay, MasterCard
and Visa to ensure interoperability
Defines how debit and credit payment applications
work – Some mandatory requirements and a wide
range of optional features and characteristics
Basis for chip migration by payment schemes in
markets around the world
3
What is Different About Chip?
•
•
•
•
Card inserted into chip-reading terminals rather than swiped
Terminal checks to see which payment applications are supported
Entering a PIN replaces the need for a signature
Chip validates the cardholder’s identity via PIN
4
Why Chip and Why Now?
Memorial University of
Newfoundland
The Debit Card Fraud Problem
Losses ($ Millions)
$100
$90
Fraud
Increasing $80
$70
$60
$50
$40
$30
$20
$10
$0
94.6
$60
$44
2003
2004
2006
6
Fraud in Canada (All Credit Cards)
Credit Card Losses
(CDN$ Millions)
140
120
100
80
2004
2003
2002
2001
2000
1999
60
40
20
Ot
he
r
Ap
p
Fr
au
d
rd
Ca
rd
Ca
No
t
No
t
Re
ce
iv
ed
Pr
es
en
t
en
st
/S
to
l
Lo
Co
un
te
rf
ei
t
0
Source – CBA Payment Card Partners Credit Card Statistics
(VISA CANADA ; MASTERCARD CANADA ; AMEX CANADA)
7
Global Migration to Chip
December 2005 (projected)
EMV
Smart Cards
(MasterCard & Visa)
EMV
Terminals
(MasterCard & Visa)
553M
9.7M
AP
EU
LAC
CEMEA
8
Key Chip Drivers in Canada
Protect integrity of payment card system
• Increase customer confidence
• Enhanced security - data on the chip is
extremely difficult to copy or change
• Counterfeit and skimming growing
• Fraud Management costs
• Pre-emptive strike against fraud migration to
Canada societal impact
9
Key Chip Drivers in Canada
Innovation
• Keep pace with global movement in card payment
technology
• Chip provides a technology platform for new product and
service offerings from Issuers, Acquirers and merchants
Efficiency
• Consistent payment experience for credit and debit
• Reduce chargebacks
• Increase POS checkout speed – PIN faster than signature
• A single chip card can offer multiple applications, such as
debit, credit, other payments and non-payment services
10
Current Landscape
• VISA Canada was the first to announce the move from magnetic
stripe and signature based authentication to chip & PIN
• Effective October 1st, 2010, Visa Canada has mandated that
liability for Visa Card face-to-face fraud default to the party that is
not chip compliant
– A chip card is presented at a retail location and the merchant’s POS is
not chip compliant. Should fraud occur, the merchant, not the issuer
will be deemed responsible for the fraud due to non-compliance
11
Current Landscape
• Interac Debit has mandated Chip in phases beginning in 2010 with
completion by 2015
• Interac will not allow for fallback to mag stripe with chip
• MasterCard has 12 issuers and 5 acquirers including Moneris
committed to introducing EMV chip cards to the marketplace
by 2010
• AMEX has made no formal commitments to chip at this time
• New chip cards will operate on the EMV international standard
with PIN authentication
12
Interac Migration Update
Interac has committed to the following timeline for Chip migration:
Segment
31-Dec-10
31-Dec-12
31-Dec-15
Deposit Taking ABMs
90%
100%
100%
Other ABMs
50%
100%
100%
POS Devices excluding AFDs
35%
60%
100%
AFD Devices
0%
25%
100%
Debit Cards with PINs
65%
100%
100%
13
Interac Migration Update
• Interac has implemented financial sanctions for those that
miss chip migration targets
• Sanctions will be levied annually on a per card and per device
basis until targets are achieved
Miss Target
1st Time
Miss Target
2nd Time
ABMs
$100
+$400
POS Devices
$10
+$50
$0.10
+$0.40
Segment
Debit Cards with PINs
14
Multilateral Approach
• VISA, MasterCard, Interac and AMEX are working collaboratively
to ensure inter-operability and to minimize rollout impacts for
issuers, acquirers, cardholders and merchants
• Each card scheme has their own policies, rules and regulations
as well as migration timelines
• Associations are committed to a multilateral approach and
have established committees to work towards the following
common objectives:
– Ensure Chip readiness
– Reducing impediments for Members and participants
– Communications & stakeholder relations
– Trial in the fall of 2007
15
Multilateral approach
• Each scheme is strongly committed to:
– Supporting ABM and POS acquirers’ ability to roll out infrastructure
efficiently and in accordance with their business objectives
– Ensuring domestic and international interoperability
– Harmonizing technical policies to achieve efficiencies
wherever possible
• Inter-scheme coordination is needed to:
– Reduce impediments to acceptance of chip during stages
of implementation
– Ensure technical interoperability across platforms and brands
– Facilitate aspects of launch/trial for those who wish to participate
– Provide a multi-stakeholder forum where common issues can be
raised and addressed
16
Moneris and the Associations
• The four payment schemes have put in place a structure to provide
this needed coordination:
– Centralized facilitation and project management provided by the
schemes and contracted resources
– Issuer/Acquirer input from both debit and credit perspectives
– Working Groups to resolve issues as they arise
• Scope includes:
– Addressing common technical and policy issues as they arise
– Aligning testing and certification requirements/procedures to the
extent practicable
– Facilitating 2007 chip trial
– Providing effective stakeholder engagement
17
Moneris and the Associations
• Moneris has senior level involvement in all of these
working groups to ensure that acquirer and merchant
needs are addressed
• As an example to the work that is being done, all
associations have agreed to work in an off-line PIN
environment at the POS, which is a change in policy for
Interac who today conduct on-line PIN
18
Kitchener Waterloo Update
• All card schemes are working together to facilitate the start of
a chip trial in the fall of 2007
• Market trial to take place in Kitchener Waterloo
• Associations pilot objectives are as follows:
1. Verify the shared infrastructure
– Confirm inter-operability of technology
2. Verify effectiveness of communications messages
– Ensure merchants and consumer messages are clear
3. Assess acceptance and adoption by cardholders and merchants
– Highlight training needs
4. Develop and share ‘best practices’ learned
5. Measure and determine the impact of Credit & Debit fraud up to
and through the launch
19
Kitchener Waterloo Update
• Moneris is committed to participating in Kitchener and Waterloo
and is already rolling out VISA capable devices in the area
• Moneris already has a VISA/MasterCard/Interac integration
specification ready for merchants who wish to participate in
Kitchener-Waterloo
• Key benefits to merchants who participate will be as follows:
– Understand infrastructure requirements
– Store staff training requirements
– Consumer impacts
– Cost implications:
• Will provide cost swag for implementation
20
Moneris Update
• In June 2005, Moneris was officially certified by VISA for EMV PIN
based credit card transaction
• Moneris was the first acquirer capable of conducting a full data
VISA EMV PIN based transaction
• All new Moneris Devices are being certified for EMV standards and
will be inter-operable with MasterCard and Interac standards
• Moneris has developed EMV-PIN based technology on IP Private
WAN, IP Public and 3101 communication protocols
21
Moneris Update
• Currently Moneris has no plans to develop EMV on 3201
communication protocol, believing that 3201 technology is being
superseded by IP and that this change in payment technology
provides an opportunity to our merchants to upgrade and gain
the benefits of the cost reductions associated with IP technology
• Moneris is currently developing to Interac and MasterCard
specifications for the purpose of certifying Moneris terminals
and Base 24 host systems
• Moneris is planning to certify and launch both Interac and
MasterCard solutions at the same time targeted for Q3 2007
22