Visa’s Quick Chip EMV Move, Banking On Perception To Trump Reality

Using the Electronic Transaction Association’s TRANSACT 16 event as a backdrop, Visa on Tuesday (April 19) rolled out Quick Chip for EMV, which the leading card brand described in a news release as being “a technology enhancement that optimizes EMC chip processing and speeds up checkout times.” Unfortunately, Quick Chip isn’t a technology enhancement nor does it optimize chip processing and it certainly doesn’t speed up checkout times. Other than that, the lead of Visa’s news release got it right.

What Quick Chip, however, does do is potentially just as powerful an aid to EMV—or quite destructive to EMV adoption, depending on who is talking—as what Visa claims. All that it does is allow the shopper to remove the card from the card reader much more quickly than current deployments permit. Given that the reader’s retention of the card until the full transaction is complete is behind a very high percentage of both merchant and consumer EMV complaints, this could be seen as a very good thing.

Let’s break this down. For almost all transactions, the Quick Chip change won’t accelerate the total transaction time at all. The customer still needs to stand there until all products have scanned and the cashier has been given the final transaction approval. Therefore, from the merchant perspective of “how many shoppers can I push through the line in an hour?” this change is unlikely to help at all.

But like so much of what happens in retail, reality never stands a chance against perception. And if consumers start to perceive transactions as being faster because they will be able to remove their card within about two seconds of inserting it, that may be more than enough to make those consumers happier with EMV. Hence, score one point for easier adoption.

Thad Peterson, a payments analyst at the Aite Group, said the change may solely be perceived, but that’s more than enough to make an acceptance difference. “This addresses a clear problem with EMV. It will probably accelerate a user’s comfort level,” Peterson said. “This is perceptual more than anything else. The behavioral barrier is putting the card in and waiting. That’s what drives people nuts.”

How much faster an experience perception? That depends on what is being compared. In Visa’s statement, Mark Nelsen, senior vice president of Risk Products and Business Intelligence for Visa is quoted as saying “Quick Chip for EMV helps make the checkout experience comparable to the ease and speed of magnetic stripe transactions.” Well, given that comparable merely means that one thing can be compared to another, that’s true.

Even a Visa executive—Stephanie Ericksen, VP Global Risk Products at Visa—conceded in an interview that a Quick Ship insert-and-remove is “not quite as fast as” a card-swipe. Then again, it is likely as fast as when the shopper needs to swipe two or more times, which is far from rare. In short, it’s fair to say that, on average, Quick Chip’s two-second hold is right up there with a magstripe swipe.

Before we delve into how Quick Chip works, there are some tradeoffs. There is potentially a slightly greater risk of a man-in-the-middle attack when using Quick Chip, but even those who see that slight increase are not too concerned. A greater concern, though, gets us back into human psychology. When trying to get any large population to change a longheld behavior—such as getting them to move from magstripe to EMV or, alternatively, NFC—the best single factor in largescale acceptance is repetition to the point where it becomes a comfortable habit.

That’s one of the factors that has slowed the acceptance rate of NFC payments, especially Apple Pay. Even shoppers who try and like it simply don’t have the opportunity to reinforce that behavior enough because there are not enough local retailers who accept it.

With EMV, shoppers are unhappy with making the behavioral change. This is made worse because some retailers force the shoppers to dip the chip while others haven’t activated EMV and insist on swipes. That isn’t great. As of now, Visa is the only card brand supporting Quick Chip. That means that consumers will have a different experience when using a Visa EMV card than when using an EMV card from MasterCard or Amex.

This gets worse. This program is optional for merchants and some types of merchants—QSR, convenience stores, multilane grocery, high-volume discount stores, coffee shops and anywhere else speed is at a premium—are the only ones Visa is going to push. That means that not only will Visa EMV behave differently than MC EMV, but the experience will change from merchant to merchant. How is that for undermining a consistent repeated experience?

Enough of that, for the moment. Let’s explore how this thing works. In creating the cryptogram needed for the EMV transaction, the EMV transaction is waiting for the final dollar amount. With the Quick Chip approach, the cryptogram is generated at the front end of the transaction, substituting a random value for the actual amount—knowing that the actual amount will be entered at the end of the transaction.

“We are allowing the card to be removed from the terminal before the authorization comes back,” Ericksen said. This works fine in the U.S. because U.S. transactions are performed online so there are no offline counters to be reset. This online-only transaction reality differentiates the U.S. market from many others.

The Quick Chip specification is available free-of-charge to payment processors, acquiring banks, and other payment networks to offer to merchants, Visa said. “Quick Chip requires a payment application software update that can be easily downloaded to the payment terminal. Once installed, the technology will work with all cardholder verification methods, including signature and PIN, and does not require the merchant to make any changes to its routing or transaction handling. Quick Chip does not require additional Visa or EMVCo testing if a merchant’s checkout system has already been certified as EMV chip compliant. No changes to chip cards are needed.”

Allen Friedman, VP of payment solutions at Ingenico, was quoted in the Visa news release endorsing the move. “Quick Chip is a solution that improves the consumer’s transaction experience with relatively minor changes to the checkout terminal. Being able to make this update using existing EMV chip infrastructure and not requiring re-certification means retailers can integrate this enhancement into their solutions with minimal impact to the POS terminal application.”

In an interview, Friedman echoed those thoughts, but added that there are some relatively minor security concerns. “It does eliminate updating the card from the issuer as part of the authorization response and it also eliminates (one element of) validation,” he said. “The part that is being dropped is a second layer of security that has to with man-in-the-middle attacks.”

Specifically, there is a response cryptogram in the authorization response message and the chip is supposed to validate that. “You then have two entities that are both validating each other,” he said, adding that he didn’t see those kinds of attacks being a major concern right now.

Part of the reason for a lack of worry is that Visa doesn’t want all merchants to offer this—and neither does Friedman—so as long as most transactions still maintain full security, it shouldn’t be a problem.

Randy Vanderhoof, who is executive director of the Smart Card Alliance, agreed with Friedman’s security take. “The data security flow has been interrupted by not waiting for the actual transaction value of the sale to be included in the cryptogram that gets sent up to the issuer and that the merchant terminal doesn’t validate the cryptogram that comes back,” he said.

One big part of the experience consistency problem is that this is currently a Visa-only program. How likely is it to stay that way?

Aite’s Peterson thinks it won’t be long. “I would expect the other card brands to follow suit fairly quickly,” he said.

Vanderhoof said that he candidly doesn’t know directly, but from what he has heard, no one should hold their breath waiting for other card brands to join Visa on this one. “The last scuttlebutt that I heard was that Visa was on their own and that there is not really any interest from other brands to do this,” he said, adding that he specifically heard that Amex has no interest in joining. “If MasterCard doesn’t go along, fewer merchants are going to want to use it.”

Indeed, some of this card-brand-to-card-brand interactions might explain why Visa—which said that it had this capability at the time of the U.S. EMV launch last year—didn’t offer this capability initially but now is.

David Robertson, publisher of the payments publication The Nilson Report (where he has worked since 1985), speculated that the most important factor at the time of the U.S. EMV launch was presenting a consistent face to merchants and shoppers.  Therefore, he theorized, Visa didn’t want to unveil this approach when MasterCard was going a different way. “They needed to have the dust to settle on that. They didn’t want to have one more layer to skew the market,” Robertson said, adding that now, about six months later, was the smarter move.

“As a marketing tool, it has value currently. They are able to draw some publicity and it does create differentiation,” Robertson said. “That doesn’t mean that MasterCard isn’t going to make an announcement (embracing Quick Chip) in a week or two.”

Ingenico’s Friedman sees it very differently. Visa “finally decided that this was an issue that they needed to try and do something about,” Friedman said and then disagreed sharply with Robertson’s take. “Visa doesn’t care what MasterCard does. Visa is confident that they are always right and that everyone will always follow them. And that the people who don’t follow them are the wrong ones.”

Friedman later stressed, though, that Visa is often correct and may be right again with Quick Chip. “They are the first ones to try something different. Is that egocentric or confident?”