Tower Group revisited its analysis of switchover costs to chip+PIN by 2001.Twenty-three This year the overall figure was $13.4 billion. expected to be three-fourths of the expenses (bank authorization system improvements accounted for 1 and bank network upgrades another 8%), merchant costs—adding in the need to meet the fast-growing online market—were expected to be Once more, there was no convincing commercial case Fast forward to late 2009, when
the Smart Card Alliance estimated total U.S. card fraud losses in 2007 at a still-moderate $1.7 billion, but indicated that total fraud was drastically understated, citing an estimate by the Mercator Advisory Group that adding in all merchant costs and the associated associated data breach forensics, lawsuits, undetected fraud, and misclassified issuer losses, the total
cost could be more like $16 billion, much of which was borne by merchants.Twenty-24 Using statistics, a 2010 Kansas City Federal Reserve report by Rick Sullivan projected payment card theft of roughly $3.7 billion, bringing in the typically excessiveCrucially, the Alliance cautioned that keeping the mag-stripe on cards and POS readers will start to compromise the gains in terms of fraud prevention for nations using EMV chip+PIN. Besides, the t) at $8.6
Billion28 Two-thirds of the outlets
in the retail sector contact card readers (though banks and networks would probably see little change in rising dangers of data breaches, with significant surges in compromised mag-stripe credentialed accounts, would inevitably require something other than a "do-nothing" response. Perhaps EMV, perhaps no lingering deployment cost factors remains deployment of PIN-pads and terminals to cover the estimated 60-70% of retail, card-accepting locations
that don’s not yet have. Javelin Strategy & Research echoed these concerns in 2010 with their revised estimate of the cost of converting to chip-based contact cards. Part of the drive for switching to chip cards in the Javelin study now becomes the necessity of a real end-to- end encryption solution.Changing the way people pay is challenging enough in any period
given the stability, predictability, and fiercely maintained status quo the United States c. With most of the EFT networks and several of the major EFT providers, introducing t m the $300 billion industry29 in which many established companies such Visa, et manufacturers and application providers, is seen as much easier, with most of the EFTs.The embryonic mobile ecosystem" discussed here is driving an unparalleled disturbance in business models—one
That has old and new payments providers
scrambling to come up with viable business cases. The ard payments system has achieved over the past half-century echnology two-way NFC mobile handsets with chip-based security that departs from plastic card paradigm and can simultaneously become a catalyst for elimination of the magnetic-stripe infrastructure The conflict between old and new, legacy and future, conventional versus value-added shows the different interests of the mobile ecosystem
as the players struggle for place Fundamentally, this is MasterCard, their large bank members, Amex, Discover, processors like First Data, Global Payments and TSYS, equipment manufacturers, and thousands of Independent Sales Organizations (ISOs), and many more others have benefited greatly for decades. Along with the large cellphone carriers (ATT, Verizon, T-Mobile and Sprint), new entrants which include non-traditional payments
businesses with significant presence like PayPal, Intuit, Apple, and Google also have hands space with new technology breakthroughs and business strategies. Customers especially smart phone users appear to have put themselves up for grabs, continuously probing the boundaries of the walled garden of payments. And businesses, which have taken front stage in the conversation because of their single responsibility for choosing which of these
Innovations for mobile checkout at
POS to adopt, are wielding unheard-of power in both political and financial spheres of this change. Such strong involvement points to the advent of a new "payments" ecosystem from which many more "parties" will argue for portions of the new revenue models for mobile transactions. If the new paradigm is chip-based contact cards, as many expect, the
infrastructure replacement cos could be in the $8-12 billion range—75% of which would logically be borne by merchants in terminal upgradesion to data breach generated fraud and the escalating costs and prospect of PCI compliance. For instance, estimates to convert current merchant locations that now handle PIN-debit to meet new PCI criteria might cost
upwards of $20,000 per store by mid2010. The most compelling case for EMV contactless is that it might be far less expensive to apply than contact cards. In the convenience PU gas, for instance. Every year, the average store runs $700 worth of card fraud. PCI compliance runs $1600 yearly, hence a stretch for business case rationale alone is not sufficient. Remote smart-card/PIN scanners would cost an estimated $50,000 to 60,000 per store or gas station
Conclusion
outfitting the pumps.28 Given that this retail vertical accounts for about 8% of retail sales, EMV contact cards provide a significant challenge. Contactless phones, on the other hand, could wind up costing less than $5000 per store if you use a Wi-Fi hotspot to communicate to within the store. According to some estimations, EMV contactless could save retailers half the
cost of deployment of their conversion expenses). Nonetheless, a reasonable number of ATMs, travel venues, entertainment centers, and food service facilities would probably have to accept the contact version in order to accommodate foreign visitors arriving to the United States with EMV contact cards; U.S. issuers would still have to produce contact cards for U.S. travelers abroan reported merchant costs.transactions. If the new paradigm is chip-based
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