The Multichannel Issues and Opportunities of EMV 2.0

The Multichannel Issues and
Opportunities of EMV 2.0
Dr. Andreas Strobel, President, SPA
Tuesday 19th November 2013

shaping the future of payment technology

01.
A short introduction


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 now
and in the future.
Since 2004
Members:


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.

NonTraditional

Ecosystem Expert Advisor Services
Help shape the future of payments

Customers

Members Customers Services
Bring Value to Financial Institutions

Members Services
T
rade Organization

Traditional / Smart Card

4

2013/11/19 •

Technologies

Mulichannel and EMV 2.0

Advanced/ New

Fig 1
Extending 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.


02.
The evolution of retail payments


Todays’ payment ecosystem for retail payments
is based on a multi-channel approach
Players

Payment means

Direct
payment

Cash

Prepaid
Commercial
Cards Credit transfers/
Direct debit

Traditional
payment
New
payment

Mobile
M-commerce

NFC
Apps
SMS
P2P Payments

Consumer

Online
EFT
E-commerce Credit cards

Google checkout
PayPal
Click and buy
1-Click

Provider payment options
 Financial institutes
(Banks, PayPal)
 Non-financial institutions:
MNOs
Device manufacturers
Merchants
 PSP

security

Payment schemes (Visa, MC, …)

Payment
channels

Suppliers
 Card vendors
 Processors
 ATM / POS providers

convenience

Consumer
availability
6

2013/11/19 •

Multichannel and EMV 2.0


Players

Payment means

Direct
payment

Cash

Prepaid
Commercial
Direct debit

Traditional
payment
New
payment

Mobile
M-commerce

NFC
Apps
SMS
P2P Payments

Consumer

Online
EFT

Google checkout
PayPal
Click and buy
1-Click

(Banks, PayPal)
MNOs
Merchants
 PSP

security


Payment
channels

Suppliers
 Card vendors
 Processors

convenience

Consumer
availability
7

2013/11/19 •



Players

Payment means

Direct
payment

Cash

Prepaid
Commercial
Direct debit

Traditional
payment
New
payment

Mobile
M-commerce

NFC
Apps
SMS
P2P Payments

Consumer

Online
EFT

Google checkout
PayPal
Click and buy
1-Click

(Banks, PayPal)
MNOs
Merchants
 PSP

security


Payment
channels

Suppliers
 Card vendors
 Processors

convenience

Consumer
availability
8

2013/11/19 •



Players

Payment means

Direct
payment

Cash

Prepaid
Commercial
Direct debit

Traditional
payment
New
payment

Mobile
M-commerce

NFC
Apps
SMS
P2P Payments

Consumer

Online
EFT

Google checkout
PayPal
Click and buy
1-Click

(Banks, PayPal)
MNOs
Merchants
 PSP

security


Payment
channels

Suppliers
 Card vendors
 Processors

convenience

Consumer
availability
9

2013/11/19 •



Players

Payment means

Direct
payment

Cash

Prepaid
Commercial
Direct debit

Traditional
payment
New
payment

Mobile
M-commerce

NFC
Apps
SMS
P2P Payments

Consumer

Online
EFT

Google checkout
PayPal
Click and buy
1-Click

(Banks, PayPal)
MNOs
Merchants
 PSP

security


Payment
channels

Suppliers
 Card vendors
 Processors

convenience

Consumer
availability
10

2013/11/19 •



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 America
65% of non cash
transactions made by
payment card!

Source: World Payments Report 2013
11


Players

Payment means

Direct
payment

Cash

Prepaid
Commercial
Direct debit

Traditional
payment
New
payment

Mobile
M-commerce

NFC
Apps
SMS
P2P Payments

Consumer

Online
EFT

Google checkout
PayPal
Click and buy
1-Click

(Banks, PayPal)
MNOs
Merchants
 PSP

security


Payment
channels

Suppliers
 Card vendors
 Processors

convenience

Consumer
availability
12

2013/11/19 •



The rise of e- and m-payments – more
payments channels and non-bank providers

 Driven by smart devices &
connectivity

CAGR 2010-14
18,1%

 Convenience and
innovation

 New players and new
usages

CAGR 2010-14
58,5%
Non-Bank
Providers
92,3%

 Leading to asymmetry and
fragmentation

 Need for accelerated
standardization

Bank Providers
55,4%
Source: World Payments Report 2013

13


Players

Payment means

Direct
payment

Cash

Prepaid
Commercial
Direct debit

Traditional
payment
New
payment

Mobile
M-commerce

NFC
Apps
SMS
P2P Payments

Consumer

Online
EFT

Google checkout
PayPal
Click and buy
1-Click

(Banks, PayPal)
MNOs
Merchants
 PSP

security


Payment
channels

Suppliers
 Card vendors
 Processors

convenience

Consumer
availability
14

2013/11/19 •



For non-cash transactions the card fraud has
been declined, thanks to chip migration in SEPA

0.036%

Source: ECB - Second report on card
fraud, July 2013

15

2013/11/19 •



In e-Commerce channel the card-not-present
fraud (CNP) is dominant and further increasing
Evolution of the total value of card fraud using
cards issued within SEPA 1)
Value in millions of EUR / %

Transactions (millions) / %

 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

CPSs: Card Payment Schemes

CNP
16

2013/11/19 •

56 %

CNP 60 %

Source: ECB - Second report on card
fraud, July 2013


03.
The gobal EMV payment market


With the US and China adopting EMV the chip
migration has become a global phenomenon

Source: EMVCo

18

2013/11/19 •



975 million pcs. smart payment cards were
shipped in 2012 by SPA Members*
+9%
+12%
+18%
+16%

+39%
+23%

418

580

675

798

898

975

2007

Mio. pcs
sold

2008

2009

2010

2011

2012

* includes all chip payment cards – EMV represents more than 90% of SPA shipments

19

2013/11/19 •



The total available market for payment chip
cards is estimated to 1.2 Billion pcs. in 2012*
EUROPE

TAM: 322M

NORTH ASIA

TAM: 238M

NORTH AMERICA

TAM: 84M

CISMEA** & EASTERN
EUROPE

TAM: 208M

SOUTH EAST ASIA
SOUTH AMERICA

TAM: 89M

TAM: 225M
Payment Chip cards deployed
or in advanced deployment
Chip cards in deployment
Chip cards migration initiated
No Chip cards
20

* 2012 Estimated Total Available Market (1166 units) by Geographies in Millions – Includes
all chip payment cards
** Includes Turkey


In all regions the growth of contactless cards
(CTLES) was stronger than for contact cards *
CTLES

+106%

CTLES

+111%

WESTERN EUROPE
Contact: 240 Mio.
Contactless: 62 Mio.

CTLES
+17%
AMERICAS
Contact: 205 Mio.

CT
-4 %
Chip & PIN deployed or in
advanced deployment

CT
-14 %

CTLES
+34%
CT
+26%

CT
+1 %
ASIA PACIFIC
Contact: 142 Mio.

CISMEA & EASTERN
EUROPE
Contact: 164 Mio.

Chip & PIN in deployment
Chip & PIN migration initiated
No Chip & PIN
21

* Comparison of SPA members shipments from 2011 and 2012


The adaption rate of DDA cards outperformed
previous technology in all regions *

DDA
+6%
DDA
+60%

WESTERN EUROPE
DDA: 258 Mio.
nDDA: 43 Mio.

DDA
+69%

nDDA
-33%

DDA
+45%
nDDA
+7%

AMERICAS

ASIA PACIFIC

DDA: 39 Mio.
nDDA: 220 Mio.

DDA: 117 Mio.
nDDA: 105 Mio.

nDDA
-7%

CISMEA & EASTERN
EUROPE
DDA: 133 Mio.
nDDA: 60 Mio.

Chip & PIN deployed or in
advanced deployment
Chip & PIN in deployment
Chip & PIN migration initiated

nDDA
-18%

No Chip & PIN
22

* Comparison of SPA members
shipments from 2011 and 2012


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?

23


04.
The multichannel opportunities &
issues


Players

Payment means

Direct
payment

Cash

Prepaid
Commercial
Direct debit

Traditional
payment
New
payment

Mobile
M-commerce

NFC
Apps
SMS
P2P Payments

Consumer

Online
EFT

Google checkout
PayPal
Click and buy
1-Click

(Banks, PayPal)
MNOs
Merchants
 PSP

security


Payment
channels

Suppliers
 Card vendors
 Processors

convenience

Consumer
availability
25

2013/11/19 •



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

26


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

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
…
Source: ECB - Recommendations for the security of internet payments, January 2013

27


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

28


05.
SPA’s role in bridging the gap


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

30


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-notpresent 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

31


Have a look at the latest SPA publications
and visit our web site
NEW!

 Biometrics for EMV Payment Cards
NEW!

 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!
32

2013/11/19 •



Thank You for Your attention!

Download from
www.smartpaymentassociation.com

#SmartPayment


The Multichannel Issues and Opportunities of EMV 2.0

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