Better Together: EMV And NFC

By Pete Rizzo (@pete_rizzo_)

The question of whether EMV-compliant ATMs, chip cards and terminals would be introduced into the U.S. market has loomed large over banks, processors and issuers for more than a decade. And just when a clear roadmap was finally introduced, the payments world was greeted with the coming arrival of a whole new way to safely enable payments, near-field communication (NFC) technology.

Contactless mobile payments would necessitate new point-of-sale (POS) solutions, and as such, many in the payments industry began to wonder if NFC would require them to revisit their security strategies altogether. In this climate, NFC and EMV increasingly appeared to be an either/or choice.

That line of thinking couldn’t be farther from the case, according to a new white paper from Gemalto. This resource presents an alternate forecast for the future of payments, one where EMV and NFC “work together to create and maintain the next generation of the consumer payment experience.”

Gemalto counters conventional wisdom by demonstrating how EMV and NFC can become a convenient and secure technology base for the next generation of consumer payments.

But, what factors led the digital security solutions provider to this conclusion, and how could this approach have repercussions beyond payments? PYMNTS.com breaks down Gemalto’s “EMV and NFC: Evolution and Deployment Considerations for the Payments Industry” to learn more.

EMV’s Track Record Of Success

Initially developed to prevent fraud in card payments, EMV has been tremendously successful outside of the U.S. for its ability to effectively render card data useless when stolen. The latest figures from the European Central Bank indicated in an August report that as much as 78 percent of all counterfeit card fraud is carried out in countries that have yet to transition to EMV.

The white paper indicates that EMV technology has been successful due to its strong card authentication, use of dynamic data and objective cardholder verification. Unlike magnetic-stripe cards, the report notes, EMV contact chip cards can be validated at the POS, and each transaction carries a distinct stamp which prevents data from being reused, even when it is stolen.

NFC’s Open Payments Environment

“The adoption of dual-interface chip technology will help prepare the U.S. payment infrastructure for the arrival of NFC-based mobile payments by building the necessary infrastructure to accept and process chip transactions that support either a signature or PIN at the point of sale.”

Visa issued this statement on August 9, 2011 when it unveiled its roadmap for U.S. EMV migration, and it reflected what Gemalto called “the changes regarding security and control that come with mobile payments.”

To illustrate how NFC and EMV can work together, Gemalto outlined how the card payment and the secure mobile ecosystems differ. In the payment card world, Gemalto wrote, acceptance terminals, cards and networks are issued, controlled and managed by financial institutions. The result, according to the research, is a relatively closed environment with strict certification and audit requirements.

By comparison, Gemalto said the mobile payments are often “conducted over open networks” that weren’t designed with security requirements in mind. Here, payment apps and their data coexist with other apps in an open environment, free from financial institution oversight, on the mobile device.

EMV And NFC Can Provide Value Together

Gemalto concluded its report by reiterating that NFC payments need to be based on EMV technology, and discussing how the two technologies can work together to bring additional value to the payments community. The solution, the white paper stated, is that mobile payment should operate with a secure element (SE), or microprocessor, that has security characteristics that compare to an EMV card.

The benefits of such a system can extend beyond payments, Gemalto concluded, enabling additional services such as coupons, discounts and geo-centric applications that complement mobile payments.

To learn more, download Gemalto’s full white paper here.