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The Multichannel Issues and Opportunities of EMV 2.0
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shaping the future of payment technology
The Multichannel Issues and Opportunities of EMV 2.0 Dr. Andreas Strobel, President, SPA
Tuesday 19th November 2013
shaping the future of payment technology
A short introduction01.
shaping the future of payment technology
Who we are
The Smart Payment Association addresses the challenges of today’s evolving payment ecosystem. We offer leadership and expert guidance to help members and their financial institution customers realize the opportunities of smart, secure and personalized payment systems and services - both nowand in the future.
Since 2004
Members:
shaping the future of payment technology4
What we do
The SPA works in partnership with global standards bodies, its own vendor community, and an expanding ecosystem of established and emerging brands to offer an ever-growing portfolio of advisory and support services.
Fig 1Extending advisory and support across the evolving community, the SPA is addressing today’s challenges and shaping the future direction of payment technologies, standards and business models.
Ecosystem Expert Advisor ServicesHelp shape the future of payments
Members Customers ServicesBring Value to Financial Institutions
Members ServicesTrade Organization
Non- Traditional
Traditional / Smart Card Advanced/ New
Customers
Technologies
2013/11/19 • Mulichannel and EMV 2.0
shaping the future of payment technology
The evolution of retail payments02.
shaping the future of payment technology6
Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach
Cash Cards
OnlineE-commerce
MobileM-commerce
PrepaidCommercial
Credit transfers/Direct debit
EFTCredit cards
Google checkoutPayPal
Click and buy1-Click
NFCAppsSMS
P2P Payments
Consumer
Payment channels
Payment means
Paym
ent sch
em
es (V
isa, M
C, …
)
SuppliersCard vendorsProcessorsATM / POS providers
Provider payment optionsFinancial institutes
(Banks, PayPal)Non-financial institutions:
MNOsDevice manufacturersMerchants
PSP
Direct payment
Traditional payment
Newpayment
Players
Consumer
convenience
availability
security
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology7
Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach
Cash Cards
OnlineE-commerce
MobileM-commerce
PrepaidCommercial
Credit transfers/Direct debit
EFTCredit cards
Google checkoutPayPal
Click and buy1-Click
NFCAppsSMS
P2P Payments
Consumer
Payment channels
Payment means
Paym
ent sch
em
es (V
isa, M
C, …
)
SuppliersCard vendorsProcessorsATM / POS providers
Provider payment optionsFinancial institutes
(Banks, PayPal)Non-financial institutions:
MNOsDevice manufacturersMerchants
PSP
Direct payment
Traditional payment
Newpayment
Players
Consumer
convenience
availability
security
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology8
Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach
Cash Cards
OnlineE-commerce
MobileM-commerce
PrepaidCommercial
Credit transfers/Direct debit
EFTCredit cards
Google checkoutPayPal
Click and buy1-Click
NFCAppsSMS
P2P Payments
Consumer
Payment channels
Payment means
Paym
ent sch
em
es (V
isa, M
C, …
)
SuppliersCard vendorsProcessorsATM / POS providers
Provider payment optionsFinancial institutes
(Banks, PayPal)Non-financial institutions:
MNOsDevice manufacturersMerchants
PSP
Direct payment
Traditional payment
Newpayment
Players
Consumer
convenience
availability
security
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology9
Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach
Cash Cards
OnlineE-commerce
MobileM-commerce
PrepaidCommercial
Credit transfers/Direct debit
EFTCredit cards
Google checkoutPayPal
Click and buy1-Click
NFCAppsSMS
P2P Payments
Consumer
Payment channels
Payment means
Paym
ent sch
em
es (V
isa, M
C, …
)
SuppliersCard vendorsProcessorsATM / POS providers
Provider payment optionsFinancial institutes
(Banks, PayPal)Non-financial institutions:
MNOsDevice manufacturersMerchants
PSP
Direct payment
Traditional payment
Newpayment
Players
Consumer
convenience
availability
security
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology10
Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach
Cash Cards
OnlineE-commerce
MobileM-commerce
PrepaidCommercial
Credit transfers/Direct debit
EFTCredit cards
Google checkoutPayPal
Click and buy1-Click
NFCAppsSMS
P2P Payments
Consumer
Payment channels
Payment means
Paym
ent sch
em
es (V
isa, M
C, …
)
SuppliersCard vendorsProcessorsATM / POS providers
Provider payment optionsFinancial institutes
(Banks, PayPal)Non-financial institutions:
MNOsDevice manufacturersMerchants
PSP
Direct payment
Traditional payment
Newpayment
Players
Consumer
convenience
availability
security
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology11
An unbroken trend - Card payments continue growing across all regions worldwide
Globally in 2011
Credit card transactions volume
+12,3%
Debit card transactions volume
+15,8%
In North America65% of non cash
transactions made by payment card!
Source: World Payments Report 2013
shaping the future of payment technology12
Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach
Cash Cards
OnlineE-commerce
MobileM-commerce
PrepaidCommercial
Credit transfers/Direct debit
EFTCredit cards
Google checkoutPayPal
Click and buy1-Click
NFCAppsSMS
P2P Payments
Consumer
Payment channels
Payment means
Paym
ent sch
em
es (V
isa, M
C, …
)
SuppliersCard vendorsProcessorsATM / POS providers
Provider payment optionsFinancial institutes
(Banks, PayPal)Non-financial institutions:
MNOsDevice manufacturersMerchants
PSP
Direct payment
Traditional payment
Newpayment
Players
Consumer
convenience
availability
security
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology13
The rise of e- and m-payments – more payments channels and non-bank providers
Source: World Payments Report 2013
CAGR 2010-14
18,1%
CAGR 2010-1458,5%
Non-Bank Providers
92,3%
Bank Providers 55,4%
Driven by smart devices & connectivity
Convenience and innovation
New players and new usages
Leading to asymmetry and fragmentation
Need for accelerated standardization
shaping the future of payment technology14
Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach
Cash Cards
OnlineE-commerce
MobileM-commerce
PrepaidCommercial
Credit transfers/Direct debit
EFTCredit cards
Google checkoutPayPal
Click and buy1-Click
NFCAppsSMS
P2P Payments
Consumer
Payment channels
Payment means
Paym
ent sch
em
es (V
isa, M
C, …
)
SuppliersCard vendorsProcessorsATM / POS providers
Provider payment optionsFinancial institutes
(Banks, PayPal)Non-financial institutions:
MNOsDevice manufacturersMerchants
PSP
Direct payment
Traditional payment
Newpayment
Players
Consumer
convenience
availability
security
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology15
For non-cash transactions the card fraud has been declined, thanks to chip migration in SEPA
Source: ECB - Second report on card fraud, July 2013
2013/11/19 • Multichannel and EMV 2.0
0.036%
shaping the future of payment technology16
In e-Commerce channel the card-not-present fraud (CNP) is dominant and further increasing
Total level of fraud has reduced overall for the SEPA region
However, card-not-present transactions now represent the biggest share and the biggest growth in terms of fraud
Most of fraudulent F2F transactions with EU cards took place outside the EU
Top 6 locations: USA, Dominican Republic, Colombia, Russian Federation, Brazil, Mexico) – Source: Europol
2013/11/19 • Multichannel and EMV 2.0
Source: ECB - Second report on card fraud, July 201356 %CNP
Value in millions of EUR / %
Evolution of the total value of card fraud using cards issued within SEPA 1)
Transactions (millions) / %
60 %CNP
CPSs: Card Payment Schemes
shaping the future of payment technology
The gobal EMV payment market03.
shaping the future of payment technology18
With the US and China adopting EMV the chip migration has become a global phenomenon
Source: EMVCo
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology19
975 million pcs. smart payment cards were shipped in 2012 by SPA Members*
* includes all chip payment cards – EMV represents more than 90% of SPA shipments
+23%
+39%+16%
+18%
+12%
580 798 898 418
2007 2008 2009 2010 2011
+9%
975
2012
675Mio. pcs sold
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology20
The total available market for payment chip cards is estimated to 1.2 Billion pcs. in 2012*
* 2012 Estimated Total Available Market (1166 units) by Geographies in Millions – Includes all chip payment cards
** Includes Turkey
NORTH AMERICA
TAM: 84M
SOUTH AMERICA
TAM: 225M
SOUTH EAST ASIA
TAM: 89M
NORTH ASIA
TAM: 238M
EUROPE
TAM: 322M
Payment Chip cards deployed or in advanced deployment
Chip cards in deployment
Chip cards migration initiated
No Chip cards
CISMEA** & EASTERN EUROPE
TAM: 208M
shaping the future of payment technology21
In all regions the growth of contactless cards (CTLES) was stronger than for contact cards *
CT-4 %
AMERICAS
Contact: 205 Mio.Contactless: 54 Mio.
CISMEA & EASTERN EUROPE
Contact: 164 Mio.
Contactless: 29 Mio.
WESTERN EUROPE
Contact: 240 Mio.Contactless: 62 Mio.
ASIA PACIFIC
Contact: 142 Mio.Contactless: 80 Mio.
CT+1 %
CTLES+106%
CTLES+34%
CTLES+111%
CT+26%
CTLES+17%
CT-14 %
Chip & PIN deployed or in advanced deployment
Chip & PIN in deployment
Chip & PIN migration initiated
No Chip & PIN* Comparison of SPA members shipments from 2011 and 2012
shaping the future of payment technology22
The adaption rate of DDA cards outperformed previous technology in all regions *
nDDA-7%
AMERICAS
DDA: 39 Mio.nDDA: 220 Mio.
DDA+60%
CISMEA & EASTERN EUROPE
DDA: 133 Mio.nDDA: 60 Mio.
WESTERN EUROPEDDA: 258 Mio.nDDA: 43 Mio.
ASIA PACIFIC
DDA: 117 Mio.nDDA: 105 Mio.
nDDA+7%
nDDA-33%
DDA+6%
DDA+69%
DDA+45%
nDDA-18%
Chip & PIN deployed or in advanced deployment
Chip & PIN in deployment
Chip & PIN migration initiated
No Chip & PIN* Comparison of SPA members
shipments from 2011 and 2012
shaping the future of payment technology23
EMV is a truly established global secure and interoperable infrastructure
Smart payment card shipments hit the one billion mark in 2011, and exceeded 1.1 billion in 2012
Ever increasing penetration of contactless payment (23 % in 2012)
Move towards more secure ways to pay (DDA more than half of shipments)
EMV is a truly established, global secure & interoperable infrastructure, and NFC is the contactless extension paving the ground for the evolving connected world
Discover and China Unionpay have joined EMVCo in 2013
US and China are moving to EMV
EMV has beat the fraud (Europol) on card payment but what about the online fraud?
shaping the future of payment technology
The multichannel opportunities & issues
04.
shaping the future of payment technology25
Todays’ payment ecosystem for retail paymentsis based on a multi-channel approach
Cash Cards
OnlineE-commerce
MobileM-commerce
PrepaidCommercial
Credit transfers/Direct debit
EFTCredit cards
Google checkoutPayPal
Click and buy1-Click
NFCAppsSMS
P2P Payments
Consumer
Payment channels
Payment means
Paym
ent sch
em
es (V
isa, M
C, …
)
SuppliersCard vendorsProcessorsATM / POS providers
Provider payment optionsFinancial institutes
(Banks, PayPal)Non-financial institutions:
MNOsDevice manufacturersMerchants
PSP
Direct payment
Traditional payment
Newpayment
Players
Consumer
convenience
availability
security
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology26
eCommerce is the „low hanging fruit“ for organized online fraud criminals
Financial institution have made significant efforts to defend online accounts
Cyber criminals target more and more eCommerce sites
The eCommerce market is huge: In 2012 the market was about several hundred billion Euros with about >20 billion transactions
Online retailer have access to credit card details and deliver goods that criminals can resell (change of shipping address, network of mules)
Most e-Commerce sites lack fraud protection; it is unclear to customers how sites are protected; fragmentation and lack of standardization
Weak user authentication only by User-ID and password
Data breaches (of huge data bases) by hacking, insiders, malicious software
Cracking of stolen passwords to reveal user credentials by todays’ powerful parallel-connected computing devices and reselling of digital IDs
shaping the future of payment technology27
Lack of strong user authentication is one of the identified weaknesses of todays’ eCommerce
The ECB forum for Security of Retails Payments (SecuRe Pay) gave 13 recommendations to tackle Card Not Present Fraud
Source: ECB - Recommendations for the security of internet payments, January 2013
Protect the initiation of internet payments, as well payment data by means of strong customer authentication
Limit the number of log-in or authentication attempts
Transaction monitoring mechanisms against fraudulent payment transactions
Implement multiple layers of security defenses to mitigate risks
Provide more guidance and education to customers
…
shaping the future of payment technology28
EMV has the basic ingredients, but some parts are missing from SPA point of view
Security, interoperability, good user experience and a robust business model for the card issuer, constitute the four key advantages of the card technology
In general the new EMV standard should include: more interfaces, transaction independent from the interface – this is mainly covered by EMVCo Next Gen
Protocols and message structures for payment convergence; harmonizing protocols on the terminal to acquirer interface to standardize the back office
More means to include “on-card” peripherals and new card functionalities needed for strong cardholder authentication to protect high value transactions
Faster and more competitive evolution of the new standard, softening of the rigid EMVCo IP policy to ensure state-of-the-art contributions/implementations
Better collaboration between PCI and EMVCo; early mandate by Card Payment Schemes requested to adopt EMV Next Generation as soon as possible
Better positioning of the secure element as THE token which offers secure authentication and protects the privacy of eCommerce transactions
shaping the future of payment technology
SPA’s role in bridging the gap05.
shaping the future of payment technology30
How we do it – SPA contributes and gives expert advice to leading standards bodies
By supporting the creation and adoption of standards and best practices SEPA: European Payments Council – Cards Stakeholder Group
Card Representative and Vendor Sector Spokesperson, Chair of the EPC-CSG Task Force to specify the SEPA functional and security
requirements for emergent & remote payments (Internet + Mobile), Conveyor of the new EPC-CSG Expert Team on Card Innovative Payments, Member of the Preparatory Committee of the SEPA Security Certification
Management Body
EMVCo: Technical Associate Board Advisor for Card Sector Next Generation Task Force: Contributor
By extending expert advice and support across the payments ecosystem An eye-catching library of expert technical resources and thought
leadership collaterals to shape the future of payment
shaping the future of payment technology31
Some take aways – Summary and recommendations
EMV has proven to be the global, interoperable and secure standard of choice to tackle card fraud at the physical point of sale – more collaboration needed
Despite the fact that overall fraud is decreasing (SEPA-region) the card-not- present fraud is further increasing
eCommerce transactions contribute to the major part of card-not-present fraud and are the low hanging fruits for online fraud
Strong user authentication is needed for eCommerce transactions – User-ID and password in cloud-based platforms is not sufficient anymore
NFC technology relying on certified, tamper proof secure elements is the recommended solution to tackle fraud for m-payments
Card Payment Schemes should engage stronger to establish strong user authentication for eCommerce by means of EMV and NFC technology
EMV based secure elements offer the ingredients to better secure eCommerce as compared to purely cloud based solutions
shaping the future of payment technology32
Have a look at the latest SPA publicationsand visit our web site
Biometrics for EMV Payment Cards
UICC Application Lifecycle Management
Software to Chip Fallback Solution
Security Certification for Mobile Platforms
Security for Mobile Payments
PIN by SMS
Private Label Payment Solutions
Business Continuity in the Payment Card Issuance Industry
… more publications to come the next weeks!
NEW!
NEW!
2013/11/19 • Multichannel and EMV 2.0
shaping the future of payment technology
Thank You for Your attention!
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