Evan Schuman's StorefrontBacktalk

Security is improved because dynamic authentication can reduce card fraud, at least at the POS. Without going into a lot of detail, dynamic authentication means the payment device (i.e., a chip card or smartphone with NFC) generates a unique field for each transaction. Therefore, compromised card data will have much less value, at least in a POS environment.

Dynamic authentication is not possible with a (static) magnetic stripe, hence the push to move to chip cards and NFC-enabled devices like smartphones. What Visa is doing is providing an incentive for U.S. card merchants to implement the POS infrastructure that will enable dynamic authentication and, thereby, enable mobile commerce while reducing POS fraud.

Mobile payments will at least be positioned to take off if there are more merchant devices capable of accepting transactions initiated by them.

Lastly, EMV technology will be positioned to take off in the U.S. market with the deployment of more POS devices, together with the accompanying back-office enhancements.

As with any announcement, there are lots of unknowns and a few unanswered questions. The biggest question is: Will the other card brands go along with Visa? Visa may be the largest issuer, but it is not the only one. The value of TIP participation goes down pretty fast if merchants still need to pay for PCI assessments to satisfy the other card brands’ security programs. Another pretty significant question is whether the TIP incentives will be attractive to any but the very largest merchants. Where incentive interchange rates benefit every merchant that qualifies, TIP only seems to benefit the largest merchants.

Speaking as a cardholder who travels to Europe and other parts of the world where my mag-stripe card is viewed with a combination of disdain and pity, where I can’t use a kiosk to buy a train ticket or rent a bicycle and where I have to ask waiters to swipe my card yet again, I hope Visa succeeds. It is time to move on and stop trying to retrofit a half-century-old technology like the mag stripe to today’s E-Commerce, mobile commerce and security requirements.

EMV is far from perfect, and it is not a silver bullet for PCI. Maybe Visa’s leadership combined with incentives and a liability shift will get the U.S. market to move to EMV cards (at least by 2015, anyway). If it does, I can support that, even if it does mean I have to start polishing my resume.

What do you think? Can your POS devices handle both EMV chip cards and NFC? I’d like to hear your thoughts. Either leave a comment or E-mail me at wconway@403labs.com.