- Address: 679 Worcester Road,
Natick MA 01760
- Email: firstname.lastname@example.org
- Website: www.vdcresearch.com
- Main: 508.653.9000
With April upon us, the one year countdown to the first step in the US EMV (Europay, MasterCard, Visa) migration mandate has begun. The April 2013 deadline, which requires acquiring banks to upgrade their systems in order to accept EMV transactions, primarily impacts the financial institutions that process card payments on behalf of merchants. Next year’s milestone, which is the first point on the migration roadmaps of Visa, Mastercard and Discover, primarily impacts acquiring banks, which function as an intermediary between the merchant and the card network (e.g., Visa). As a result, we expect this imminent requirement, along with others looming further ahead in April 2015, will precipitate a rapid increase in compliance-driven demand across the US during the next several years.
From a hardware perspective, EMV migration in the US creates an obvious need for contact/contactless chip cards, EMV capable payment terminals and EMV reader modules that can be integrated into self-service solutions such as ATMs, self-checkout solutions and kiosks. Leading EMV vendors such as Oberthur Technologies have anticipated this emerging need and already have begun shipping limited volumes of EMV cards and related solutions. Whereas the majority of EMV hardware demand will be driven by the April 2015 deadline, when merchants must upgrade their payment solutions and card issuers will move to EMV-capable cards, VDC expects the preceding 2013 directive—which affects only acquiring banks, not merchants or card issuers—to have relatively little impact on the EMV hardware market. On the other hand, as April 2015 approaches and merchants work towards EMV compliance, we expect demand for EMV payment solutions will increase significantly.
In contrast to hardware vendors, EMV software providers should expect significant demand growth during the entire migration process. This increase will be driven by all payment value chain participants, including card acquirers, merchants and card issuers. Near term opportunities will be driven primarily by acquiring banks making compliance-related upgrades to their systems on the back-end of the payment value chain. As the 2015 deadline approaches, however, demand will be driven largely by merchant upgrades of front-end payment solutions and integration of these systems with adjacent transaction automation, customer engagement and inventory management solutions.
The greatest market opportunity US EMV migration creates may be for services and integration providers—those with the knowledge to deploy EMV and the ability to make it work across each step in the payment value chain. Unlike EMV hardware and software, integration knowledge and experience cannot simply be manufactured—it must be learned and developed. We think this could lead to an EMV knowledge gap within the US, resulting in a backlog of unfulfilled demand for EMV service and integration. During our recent visit to Cartes North America, EMV software and service providers from the UK and Brazil described similar phenomenon during the migration processes in these regions.
Considering the US is an EMV laggard, we see no reason circumstances will be any different here. Accordingly, as EMV gains momentum in the US, VDC believes in-house integration and service capabilities will be significant differentiators for hardware/software vendors. Suppliers looking to capitalize on this emerging opportunity should position themselves as a complete end-to-end EMV solution provider—rather than simply as a source of hardware/software.