Fast Food Giant Raises Questions About EMV
An executive with a nationwide fast food chain has gone on record as doubting whether the benefits of moving to EMV cards from magnetic stripe cards will be worth the expense.
EMV cards carry security and other validating data on computer chips embedded in the cards while magnetic stripe cards carry this data on a strip of magnetic tape on the backs of the cards.
EMV cards are widely considered more effective against fraud – and have been widely adopted outside the U.S. – but are more expensive to issue and require point-of-sale terminals capable of reading the cards.
Speaking at the annual conference of NACHA – the Electronic Payments Association which was held in San Diego from April 21-24, Wendy's vice president and assistant treasurer, Gavin Waugh, said he doubted that the savings in fraud costs would be worth the expense of putting in the terminals.
Noting that his firm already had terminals that allowed consumers to use personal identification numbers, Waugh reportedly called any additional fraud protection from EMV cards negligible, according to the Finextra news service.
“Even if we pay the fraud liability, it's a whole lot cheaper than putting in (new EMV) terminals,” Finextra reported him as saying.
Executives with two other retail firms, Costco and Sinclair Oil Corp., expressed similar doubts in the Finextra piece.
Major players in the cards processing space – including CO-OP and other processors and the major card brands – are moving toward EMV adoption in the U.S., and some large credit unions have begun offering the cards to members for overseas use.
Waugh's comments came a few days before an executive with a leading card processor, FIS, acknowledged that there was a weak short-term business case for moving to EMV.
In addition, Richard Sullivan, the senior economist with the Federal Reserve Bank in Kansas City, authored a paper which suggested the U.S. lacks the fraud-tracking superstructure needed to fully take advantage of EMV's fraud fighting potential.
Sullivan noted, for example, that the transition model currently planned in which card issuers would implement EMV cards that also have magnetic stripes would undermine fraud protection.
“Evidence from overseas suggests any prolonged accommodation of older-card technology during a transition to computer-chip cards can allow fraudsters to exploit weak links in card security,” Sullivan wrote in the published paper. “Reliance on low-cost authentication methods also invites growth in fraud.”
Sullivan also noted that as EMV cards decrease the incidence of counterfeit card fraud, the prevalence of card stolen or lost fraud is liable to increase.
Many countries that use EMV payment cards do not allow cardholder authentication with signatures, Sullivan wrote.
“Issuers in the United States, however, appear likely to continue to allow signature authorization on EMV debit and credit card transactions. As a result, fraud on lost or stolen cards may not decline in the United States,” he wrote.