Business Case for EMV Chip: Carrot More Compelling Than Stick
Although it has become the standard in Europe, Asia and Latin America, there has been relatively little interest in moving to EMV chip technology in the United States.
Banks have heard the various arguments for the chip, mostly those that warn what’ll happen if the U.S. payments industry doesn’t convert, that American issuers will fall behind Europe, or that U.S. issuers are losing out on revenue from transactions in foreign countries because their customers’ cards aren’t accepted by chip-enabled POS devices, or that continuing to rely on magnetic stripe technology will leave issuers (and soon, merchants) more and more vulnerable to fraud.
Credit unions, of course, are exempt from the new interchange regulations, but that does not mean they’re not subject to the problem as the business model currently stands, namely that LVPs are too expensive.
LVPs represent the biggest opportunity for growth in the payment industry, but if each of those transactions represents a net loss to the issuer, that “growth” won’t do much good. In order for the LVP segment to be valuable, issuers will need to be able to price transactions at a level that merchants will be willing to accept but still delivers a profit.