Costs
The business case for implementing EMV technology has changed for the better
(in terms of their significance for the bottom line of the business case) over
the last couple of years:
- Direct cost of fraud in the U.S. is definitely on the rise as described
above. Additionally, the industry needs to fully acknowledge that cost of
fraud is not limited to the direct net fraud losses; fraud management
expenses contribute rather substantially to the overall fraud cost. Visa
suggests that indirect fraud costs are “at least equal to direct fraud
losses, and can often be much higher” [Visa2009]. Visa also claims that
”opportunity costs, which include the behavior of cardholders subsequent to
experiencing fraud, vary considerably — but can easily account for more than
15 percent of total fraud costs.”
- As said before, the cost of the alternative measures that the U.S.
payment industry uses for detecting and mitigating fraud as described above
have been growing significantly. For instance, as a result of the well-known
mass data compromises, millions of cards had to be reissued, and customer
service costs for issuers and merchants have been increasing. Most of this
can be avoided through a proper and comprehensive implementation of EMV.
Consequently, Visa has waived significant parts of PCI maintenance and
continuous auditing for those merchants who perform more than 75 percent of
transactions in EMV mode outside of the United States, and will now do the
same for U.S. merchants.
- The cost of chip cards has decreased considerably over the last couple
of years as a result of growing card production capacities, maturing card
manufacturing technology and the decreasing prices of the integrated circuit
chips. Certainly, the financial industry has benefitted in this regard from
the fact that EMV chip technology is very similar to the technology
supporting billions of mobile telephones
- Similarly, the cost of payment and POS devices has come down
significantly. Furthermore, a substantial proportion of POS devices in the
U.S. market already contain chip-reading hardware capabilities onto which
EMV software can be downloaded. This situation improves with every new EMV
capable device shipped as part of the standard POS device maintenance cycle.
- Most of the big issuers, acquirers and processors in the U.S. are
already issuing chip cards and/or are acquiring EMV transactions based on
the fact that they are operating in EMV territory abroad and have had to
adapt as a result. They are at least familiar in principle with the impact
of migrating to EMV, and most of them have modified at the very least their
international issuing and back end systems to integrate EMV
