EMV: transforming the payment experience William Tran, Marketing Manager, Secure Transactions with Gemalto Lori Breitzke, North America Marketing, VeriFone

When is it coming to the U.S.? How will EMV change the POS? Today’s agenda What is EMV? Why EMV? When is it coming to the U.S.? How will EMV change the POS? B&M Online Mobile capabilities Transaction & Process changes due to EMV Questions & Answers

Gemalto

What is EMV?

What is EMV? Global standard for chip card and mobile payments Developed by Europay, MasterCard and Visa in 1993 Typically a chip inset within a plastic card Much more secure than magnetic stripe cards CONTACT OUTSIDE EMV chip cards use an embedded microprocessor for payment transactions INSIDE Secure chip stores payment information Chip card authentication prevents counterfeiting Adds cardholder verification methods Offers online or offline authorization

EMV is the Gateway to Digital Payments 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EMV Contact & Contactless Cards Mag-stripe on the back Contactless Antenna inside EMV chip

The Payment Ecosystem is Rapidly Evolving

EMV Enables Contact, Contactless and Mobile EMV contact – card is placed into a device that reads the data on the chip Enter individual PIN code. The card checks the PIN stored on the card. Sometimes PIN is omitted and a signature is required. Contact Payment Terminal EMV contactless payments – simply tap the card and pay securely NFC mobile payments – provides secure mobile payments, increased loyalty and marketing options for issuers NFC-enabled phone 2 inches Contactless Payment Terminal Contactless Payment Terminal

How it Works Online and offline authentication validates that the card is authentic Uses cryptography and the chip’s microprocessor Protects payment system against counterfeit cards Can take place online, offline, or both Online and offline transaction authorization Authorization provides approval for the transaction based on issuer parameters Online authorization includes transaction-specific cryptogram Offline authorization is completed by EMV card and payment terminal EMV can require online authorization for every transaction EMV supports four methods for verifying the Cardholder Online PIN Offline PIN Signature No CVM Source: EMVCo

Why EMV?

EMV Reduces Fraud 2008 – 2010: Canada noticed increased peaks of fraud due to holiday season 2011: No spike in fraud due to holiday season As EMV penetration at POS increased, counterfeit as well as other types of fraud decreased ** % face to face EMV penetration Source: MasterCard Analysis 2012

Annual Fraud Losses on UK-Issued Cards (Pounds MM) ** % face to face EMV penetration EMV is introduced Source: http://www.financialfraudaction.org.uk Source: MasterCard Analysis 2012

EMV Provides Global Interoperability AFRICA, THE MIDDLE EAST 17.6% of cards 60.7% of terminals ASIA PACIFIC 27.0% of cards 43.0% of terminals CANADA, LATIN AMERICA, CARRIBBEAN 31.2% of cards 76.5% of terminals EUROPE ZONE 1 73.9% of cards 89.0% of terminals EUROPE ZONE 2 12.7% of cards 6.4% of terminals UNITED STATES Source: EMVCo

When is emv coming to the u.s.?

687 Days: U.S. EMV Migration Milestones Dates Apr - 2013 Oct - 2013 Oct - 2015 Oct - 2016 Oct - 2017 VISA Acquirers and sub-processors must support EMV (Mandate)   US Liability Shift1 Automated Fuel Dispenser (AFD) Liability Shift1 MasterCard Acquirers/sub-processors must support EMV Maestro ATM liability shift1 Merchant Account Data Compromise(ADC) relief (Phase I) US Liability Shift2 Merchant ADC Relief (Phase II) US liability shift for ATM transactions AFD Liability Shift2 Discover Acquirers, sub-processors, direct connect merchants must support EMV elements TBA American Express Acquirers and sub-processors must support EMV, including mobile (Mandate) PCI DSS relief 75% of transactions occur on Amex EMV chip-based contact and contactless devices US Liability Shift AFD Liability Shift 1 Liability for counterfeit transaction shifts to terminal owners if they don’t accept EMV 2 Liability for counterfeit transaction shifts to party who has least-secure support

The Two Largest Payment Card Markets in the World are Migrating to EMV It typically takes 5-6 years to cover the majority of the market in a given country

VeriFone

How will emv change the pos?

How will the payment experience change? Mobile Micro/Macro Online e-commerce Brick & mortar Branches In-Store

How will the B&M Payment experience change? At the POS Device will prompt consumer to “insert card” Amount has to be entered prior to card insertion Processing time may be longer Industry Stakeholders Longer certification process Stronger payment security For the Consumer Consumer may be prompted for more data after the card is inserted Card will need to be kept in the device the entire time the transaction is being processed

U.s. transaction view – today & future Host Processing Fraud/ Velocity Check MAG-STRIPE DELIVERY Mag-stripe Validation Open to Buy Check Card Swipe Clerk Data Entry/ Amt. Other Send to Host Response From Host Approval/ Decline Message Receipt Printing Terminal Processing Host Processing Cardholder Verification CVM) Terminal Risk Management Terminal Analysis/ Decision EMV CONTACT Application Selection Offline Data Auth. Processing Restrictions Card Validation Fraud/Velocity Check Open to Buy Check Clerk Data Entry/ Amt. Other Card Insert Terminal Verification Results (TVR) Send to Host Response From Host Approval/ Decline Message Receipt Printing Remove Card Card Processing Host Processing Terminal Verification Results (TVR) Terminal Analysis/ Decision EMV CONTACTLESS Card Validation Fraud/Velocity Check Open to Buy Check Clerk Data Entry/ Amt. Other Card Tap Send to Host Response From Host Approval/ Decline Message Receipt (may not be required)

Transaction times comparison DIAL Card Swipe Pre-Dial Clerk UI (Amount) Connect Transmit/Receive Print Receipt DIAL WITH EMV Clerk UI/Entry of Data (Amount) Insert Card Dial Connect Transmit/Receive Print Receipt

Market Solution Certification Changes Certification Criteria Level 1, Level 2 Certifications Brand testing, individual tests vary by scheme Each brand has their own specification (based on EMVCo) Contact and Contactless testing require specialized tools Tools updated frequently to provide necessary scheme simulation Results of New Criteria Certification will take more time to accomplish at the acquirer levels Ongoing certification work must be maintained for solutions Ongoing investment is required to keep up to date on tools and certification process Specialized training will be required to accomplish this new solutions delivery

Field Upgrades, How EMV is Different Today Devices are deployed, and in some cases, not touched for years Merchants are reluctant to be reprogrammed, to give time for the activity Infrastructure (dial lines, ..etc) not setup to handle large downloads Tomorrow, EMV Challenges (Contact and Contactless) EMV components, kernels for contact and contactless can and will change New cards issued with new functionalities happen, require downloads to accept the card Interoperability will be impacted if devices are not kept up to speed Contactless software components, EMV and for NFC initiatives, will require updates and changes to remain field-ready for new cards

Merchant Decisions for the U.S. Stand Alone Devices Customer total amount verification, EMV card insertion, and Contactless tap Speed of transaction Hand over, external pin pad (with Contact/Contactless/Mag-stripe Delivery support) Integrated Customer facing, Communication options, USB, RS-232, IP Register software changes to drive the device differently (Amount first, no walk up and swipe) Semi-Integrated Light cash register integration Direct to host for processing, removing register knowledge of EMV or transaction data

VeriFone Solutions

EMV CAPABLE DEVICES – VX & VX EVOLUTION SOLUTIONS Countertop series Vx 570 VX 520 Portable series Vx 610 Vx 670 VX 520 VX 680 Consumer Facing series Vx 810 VX 820 VX 805

EMV CAPABLE DEVICES – MX SERIES SOLUTIONS Consumer Facing series MX 850 MX 860 MX 915 MX 870 MX 880 MX 925

More information To learn more about EMV and VeriFone’s hardware, software, training and support solutions that can smooth the EMV migration process, please go to www.verifone.com/emv-us and www.verifonezone.com.

Thank you