Late with Its ‘Roadmap,’ AmEx Could Jump into EMV Lead Among Networks

American Express Co. announced what it calls its “roadmap” for EMV and chip-based and mobile payments in the U.S., which means all four of the major U.S.-based payment card networks are now on record with plans to move beyond the magnetic-stripe payment card.

Like the ones from MasterCard Inc. and Discover Financial Services, AmEx’s plan disclosed Friday largely follows the major deadlines announced last August by Visa Inc., the largest payment card network. But AmEx also said it would start issuing EMV cards to Americans later this year, which might actually move the New York-based company into the front ranks of U.S. EMV issuers despite being the last big network to announce an EMV plan.

Suzan Kereere, senior vice president and general manager, American Express Global Network Business, attaches little significance to the fact that AmEx’s three major rivals unveiled EMV plans for the United States earlier. AmEx either directly or through bank partners already offers EMV cards in 51 countries. “EMV is not new to us, we’ve been at this process for quite some time,” Kereere tells Digital Transactions News. She also notes that AmEx’s network is mainly a closed loop, which presents issues different from the open bank card networks where issuer and merchant acquirer are usually separate companies.

“In my mind we wanted to come into the market at a time that was right,” she says. “It made sense to move right now. I don’t think we’ve come out too early or too late.”

Kereere says some U.S. cardholders have had problems using their mag-stripe AmEx cards in EMV countries, a difficulty reported by other issuers. Merchants, meanwhile, are beginning to voice concerns about fraud migrating to the U.S. as the last bastion of the mag stripe, which is much more vulnerable to counterfeiting than the Europay-MasterCard-Visa chip. “From a merchant’s point of view, because we were now technically the last man standing, [they are saying] that we were open to fraud,” she says.

AmEx began converting its cardholders in Canada, the most recent major industrialized country to adopt EMV payments, some 14 months ago. Kereere says the conversion “is going quite well,” though she would not give details.

AmEx has the potential to become the biggest major U.S. EMV issuer as a percentage of its cards in force, at least temporarily, if it gets a large number of chip cards into the market relatively soon. That’s because AmEx’s U.S. card base, 50.6 million cards at the end of 2011, is much smaller than the Visa-MasterCard base and AmEx directly issues most of them. AmEx does have eight U.S. bank partners that issue AmEx-branded cards. In contrast, thousands of individual banks issue Visa and MasterCard cards and they all must make their own EMV decisions. A few have begun issuing EMV cards, mostly to international travelers.

Under AmEx’s roadmap processors must be able to support AmEx EMV contact and contactless chip card and mobile transactions by April 2013. (The networks see EMV working hand-in-hand with mobile devices enabled for contactless payments.) In October 2015, liability for fraudulent transactions will shift away from the party that has what AmEx calls the most secure EMV technology. Fuel merchants will not be subject to the liability shift until October 2017 because of what the networks say is the of the greater effort needed to convert their complex payment systems to meet EMV’s requirements. Visa spelled out those three major dates in its plan, and all the other networks have now said they want to make conversion as easy as possible for merchants and merchant acquirers by setting uniform deadlines.

Like Visa and MasterCard, AmEx also is offering merchants a carrot to convert to EMV payments in the form of an exemption from annual validation that they comply with the Payment Card Industry data-security standard (PCI), which each network enforces. AmEx merchants will get that exemption if 75% of their transactions originate from locations that support EMV-compliant contact and contactless payments. “We wanted to make it pretty simple,” says Kereere. “The PCI DSS sometimes is pretty onerous.”

AmEx also says it will support various authentication methods for EMV payments, including so-called chip and PIN and chip and cardholder signature.

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